NAFCU Compliance Blog

BSA Forms; OCC CMPs; Member Call-In

Written by Sarah Loats Zimmermann

Happy Thursday everyone! It's almost Friday!

 

New CTR and SAR forms.   Hat-tip to a fellow reader on this one - it seems we haven't mentioned the new forms yet. FinCEN has new CTR and SAR forms available on its website. The forms were issued March 2011 and can be used immediately. The forms note that previous editions of the forms will not be accepted after September 2011, so if you are still using the earlier versions, it might be time to think about switching over. There have been no substantive changes to the forms but the new versions will have to be used just the same after September.

 

OCC Civil Money Penalties. The OCC has announced it issued civil money penalties against J.P. Morgan Chase. The penalties related to the marketing and sale of credit protection products. The OCC asserts the marketing practices were unfair and deceptive and in violation of Section 5 of the Federal Trade Commission Act. I think this is noteworthy on two levels - 1) it attacks sales tactics of credit protection products, and 2) it uses the agency's unfair and deceptive authority to go after marketing practices it doesn't like. As we already know, the Federal Reserve issued proposed rules to increase disclosure requirements on credit protection products. The proposal may be tabled, but remember the GAO conducted a study on these products? And recommended to the CFPB that it review these products? I think this civil money penalty is just another sign that these products are being scrutinized by the regulators.

 

Member Call-In. NAFCU members, you can join us today for the member call-in. It is set for 4 pm EDT this afternoon. As always, the agenda includes a Washington regulatory and legislative update.

 

This and That: Mortgage Servicing; Complaints; CFPB; Interchange; UDAP

Posted by Anthony Demangone

A loyal reader let me know that he didn't mind my "This and That" posts.  But when he later tried to find something, he had to sift through 30 emails with the subject line of "This and That."  Opening emails one-by-one is not a great way to spend one's time, especially as a credit union compliance person in 2011.  Thanks to that input, I'll now try to draw attention to the subjects covered in the email in the...well, subject line. 

Mortgage Servicing. Yesterday, I mentioned how State AGs have issued a major proposal that outlines what they want changed in the mortgage servicing arena. Cheyenne Hopkins at American Banker produced this stellar piece of journalism that includes an overview of the issues, as well as a link to the AG proposal itself.  Could this be a big deal?  Read this part of her story and judge for yourself:

The term sheet, obtained by American Banker and available here, is just the opening bid in an ongoing negotiating process between the servicers and various state and federal agencies attempting to punish them for significant issues uncovered in the foreclosure process. While some of the details of the term sheet have been made public already, the sheer breadth and depth of the proposed requirements were not clear until now.

The term sheet covers virtually every detail of how servicers operate, laying out new requirements for mortgage documentation, interaction with borrowers, relationships with active military personnel, loan modifications, principal reductions, bankruptcy proceedings, short sales and technology systems.

This is one story to watch.  Mortgage servicers don't get a lot of love these days, especially with stories about how major servicers are foreclosing on homes with no mortgages.  I worry that new draconian measures meant to punish the bad actors will also affect the good guys.  AKA, us.

Complaints.  We've written a bit about complaints recently.  Hat tip to Van Beek for forwarding this annual list from the FTC - The Top 10 Consumer Complaints of 2010.   I wonder if folks at the CFPB and NCUA would look at this? If they did, they'd see the following in the top 10.

1.      Identity theft.
2.      Debt collection.
10.    Credit cards.  

What are the top 10 complaints you've received from your own members?  What if an examiner asked you that question?  Would you be able to pull that data?  

CFPB.  Richard Cordray, the former Ohio Attorney General who now heads up enforcement at the CFPB spoke yesterday to the National Association of Attorney Generals.    And he asked for their help. While I view the alignment of the CFPB with the state attorney generals to increase compliance risks for credit unions, Mr. Cordray did talk about the ability of AGs to level the playing field between credit unions and non-bank companies against which we compete.

Of course, State attorneys general also know that leveling the playing field across different kinds of financial providers and products and services is essential and will require sustained resources. Tens of thousands of so-called “non-bank” companies offer consumer financial products and services – they just don’t take deposits like a bank or thrift. These companies need to be subject to similar oversight and enforcement as banks if they are competing for customers with similar products and services in the same marketplace. Our nation has always maintained independent funding for bank regulators apart from the political process – and the consumer bureau, charged with regulating both banks and non-banks, has been set up the same way.

The consumer bureau will depend on the expertise and experience of State attorneys general as we work together to protect consumers. We will be more effective and efficient because of this partnership, and I know my visit with the State attorneys general today is another step toward a sustained effort to insist on fairness in the marketplace.

Interchange. The credit union's position on interchange made the front page of the New York Times.  

 “I am appalled that our members will shoulder tremendous financial burden and still be on the hook for fraud loss while large retailers receive a giant windfall at the hands of the government,” John P. Buckley Jr., the president of Gerber Federal Credit Union of Fremont, Mich., told a House of Representatives subcommittee last week.

Amen, Mr. Buckley.  Even the OCC weighed in with its sister agency on the Fed's debit interchange proposal.  

The impact of a revenue reduction of this magnitude has not been studied, but it is clear that it will change how financial institutions, both large and small, will do business, with obvious negative impacts on their ability to recover their costs of operation and unpredictable collateral consequences to their customers. We therefore urge the board to reconsider its rate-cap based approach in light of the flexibility it acknowledges it has to pursue other choices.

To be fair, not everyone is on our side.

UDAP.  As a reminder of how powerful UDAP can be in the hands of a regulator who wishes to use it, read this story about a Nebraska credit card issuer who settled with the FDIC for more than $10 million.

UDAP; The Importance of Risk Management

Posted by Anthony Demangone

NCUA issued a very interesting legal opinion yesterday, Letter to Credit Unions 10-0842.   Here's a snippet:

You inquired whether federal credit unions (FCUs) can provide identity theft protection services programs to their members where:

• • FCUs automatically enroll their members, without the members’ request or express consent, to receive their services on accounts advertised as free checking;
  •  FCUs deduct periodic fees from the members’ checking accounts unless the members opt out of receiving the services; and
  • the FCUs’ account agreements with the free checking accountholders include a truth-in-savings fee disclosure, listing a one dollar monthly fee for the services, but describing the fee as “optional.

”While we would look at each specific program to determine its permissibility, a program providing these services to “free checking” accountholders, without their request or express consent, charging them a dollar a month, and disclosing the fee as optional, while using an opt out only option, appears to be an unfair or deceptive practice and may present problems under NCUA’s truth-in-savings and advertising regulations. (Emphasis added.)

In its letter, NCUA doesn't come out and say that such program is a de facto violation of UDAP and Truth in Savings, as it hadn't seen all of the applicable disclosures.  But the tone of the letter is obvious - NCUA sees a lot of red flags.  Here are two take-aways from this letter.

• If your credit union has such a program, you'll need to read this letter closely and address the regulatory concerns outlined by NCUA.  
• This is a classic example of how something that looks contractually solid can start shaking like a leaf when the words "unfair and deceptive" are uttered by a regulator.  Guess who has the right to say those words beginning in late July? That's right, the CFPB.

***

Felix Salmon at Reuters has another interesting post on the financial industry. It is worth a read, but I focused on a supervisory letter within Salmon's post that was issued by the OCC to Citgroup in February 2008.  The letter pounded Citi for weak risk management practices.  I understand the letter was written in 2008, and that credit unions are not international mega-banks.  But the letter would be useful to see how the OCC expects its institutions to implement risk management. And I think that is very useful for our industry.  Here are some findings: 

• The Board and senior management have not ensured an effective and independent risk management process is in place. Risk management had insufficient authority or failed to exercise its authority to constrain business activities.
• The Board and ARMC were not provided meaningful or systematic information on. material risk and compliance with limits, controls, or concentrations. The Citibank, N.A.Board had no effective oversight role specific to the risk profile of the bank.
• (Citi must) Raise the stature of risk management in the organization. Perform a thorough, top-down,assessment of the risk management function, its roles and responsibilities, staffing levels,management competencies, and risk tools to ensure it can be effective as a control function.
• Review the content of information provided to senior management and directors to ensure it is meaningful and relevant. It should include a strengthened and systematic discussion of sensitivity to various risk factors across business segments, compliance with limits and controls, and the evaluation of risk versus allocated capital.

Again, this letter is roughly two years old, so Citi may have addressed these concerns already.  But I think there is always value to be found in failure analysis, especially when that failure happens over there.  Take a look at those findings.  I would argue that they could apply to many organizations, including some credit unions.  Warning, I'm hopping on my soap box.  Risk management is not sexy.  Risk management will never be a revenue producer.  But perhaps some have focused too much on revenue and growth in the past.  Sometimes, the best decision an organization can make is to say no, especially when it has determined that it cannot manage the risk that comes with the reward.   

NCUA Board Meeting; Overview Updated

Posted by Anthony Demangone

The NCUA Board Meeting agenda is set for this Thursday.  Here's what is on the open agenda:

1. Withdrawal of Final Rule – Part 706 of NCUA’s Rules and Regulations, Unfair or Deceptive Acts or Practices.

2. Insurance Fund Report.

So goes UDAP.  NCUA is following the Fed in withdrawing the UDAP rule.  I would think that their rationale would be similar to the Fed's, which you can read here. Simply put, many of the protections found within the recent UDAP rule have been overtaken by the CARD Act.  Now that those protections are housed within Regulation Z, the need for UDAP seems, well, unfair and deceptive.  It is amazing to remember how frazzled we were when that UDAP rule was released in December of 2009.  Little did we know...

***

NAFCU Members, the Reg Z overview document has been updated with the following sections:

1. Periodic statements sent 21 days before the due date; and
2. Increasing APRs due to a consumers default or delinquency, including the 60-day delinquency requirements.

1,155-page Final Regulation Z Open End Rule Drops

Posted by a frazzled Anthony Demangone

Yesterday, the Federal Reserve released the long-awaited final regulations that amend its open-end lending rules.  Here's what happened. 

• First, the Fed issued a final rule to withdraw Regulation AA (UDAP.)  The UDAP rule was overtaken by the Credit CARD Act, so the Fed withdrew it as "unnecessary."  The Fed explained that the UDAP requirements have been revised for consistency with the Credit CARD Act and have been incorporated in the new rule, linked above.  I expect that NCUA will withdraw its UDAP rule as well.
• Second,  the Fed issued another final rule to withdraw the Regulation Z final rule that they issued back on January 29, 2009.   This was the rule that had the original July 1, 2010 effective date.  The Fed has indicated that those requirements have been revised to be consistent with the Credit CARD Act, and those requirements have been incorporated within the massive Reg Z final rule.   How are they handling the two different compliance dates?

The new final rule is effective on February 22, 2010. However, to the extent consistent with the Credit Card Act, the Board has retained the July 1, 2010 mandatory compliance date for many of the provisions incorporated from the January 2009 Regulation Z Rule. The Board has provided additional discussion of the withdrawal of the January 2009 Regulation Z Rule and the mandatory compliance dates in the Supplementary Information for the new final rule.(Emphasis added.)

And the Fed also issued the massive, 1,155 page final rule to amend its open-end rules.  As noted above, it massages and incorporates the UDAP and original Reg Z open end rules. Here's a link to that 1,155 page document. 

Here's some useful links that we've created:

1. Save a copy of this final rule to your computer so that you don't have to hunt down the Fed's website every time you want to review it. 
2. Read the 12-page summary of major revisions.   
3. Do you just want to look at the regulations?  Here's a link to the regulatory language.  Granted, it is still 144 pages long.  But I added section bookmarks to help you navigate it.   
4. What rules apply to just credit cards?  Which rules apply to all open-end lending?  Look at this chart.
5. What are the mandatory compliance dates?  The Fed lays this out in excruciating, yet necessary detail, in these 37 pages.   

That should be enough to get you guys rolling.  Don't worry - we're not done on this issue.  Not by a long-shot.

The Regulation Z Open End Proposal Drops; Additional 21-Day Guidance

Posted by Anthony Demangone

Yesterday, the Federal Reserve released a proposal to amend the open end rules to Regulation Z.  Specifically, the Fed's proposal is designed to implement the sections of the Credit CARD Act that will take affect February 22, 2010. 

First things first.

1. The RESPA section-by-section analysis is going to be put on hold.  Perhaps for a good while.  

2. We're going to discuss this proposal quite a bit.  There may be others (inside or outside your credit union) who would benefit from the discussions we lead on this blog.  Feel free to forward this email to them.  They can sign up to receive daily blog emails via this link. They'll have to enter their email address and later click on a confirmation email.  There's no cost, and this blog is open to all credit unions - not just NAFCU members.  And they can unsubscribe at any time.

Now, on to the proposal.  It is 841-pages in length.  That page number, however, includes the preamble, model forms, official staff commentary, etc.  What I want to do today is to "shrink" the proposal into a series of usable tools.

1. Here's a link to the proposal.  Stop right now and save the document to your computer.  Personally, I'd have it on my desktop.  You'll be referring to this proposal quite a bit, so this will save you some time.
2. Within the 841-page document, there is a 7-page summary of the major changes.  I'd read that next.   View the overview here.
3. Some sections apply just to credit cards.  Some to all open-end credit.  The Fed created a 2-page chart to clarify which sections apply to what.  View the chart here.
4. Perhaps you just want to look at the regulatory text without the charts, commentary, preamble, etc.  The actual regulatory language is roughly 127 pages.  Not short, but far better than 841-pages  Read just the regulatory language here.
5. If you must print out this document, consider printing it on both sides (duplex).  Even better, when printing it, consider printing two pages on each side.  In other words, each piece of paper will have 4 pages of the proposal.  That way, you can print out all 841-pages of the proposal on roughly 210 sheets of paper.

Here are some general thoughts and observations:

• There's new guidance on the 21-day issue.  The Fed issued a proposed change to the commentary to indicate that the prohibition against treating a payment as late for any reason only applies during the 21 days after a statement is mailed.  Here's the language, which can be found on page 592.

2. Treating a payment as late for any purpose and collecting any finance or other charges. Treating a payment as late for any purpose includes increasing the annual percentage rate as a penalty, reporting the consumer as delinquent to a credit reporting agency, or assessing a late fee or any other fee based on the consumer’s failure to make a payment within a specified amount of time or by a specified date. The prohibition in § 226.5(b)(2)(ii) on treating a payment as late for any purpose or collecting finance or other charges applies only during the 21-day period following mailing or delivery of the periodic statement. When an account is not eligible for a grace period, imposing a finance charge due to a periodic interest rate does not constitute treating a payment as late or collecting finance or other charges as a result of a failure to comply with § 226.5(b)(2)(ii).

And the Fed discussed it on pp. 30-31 in the preamble as well.

The Board is proposing to amend comment 5(b)(2)(ii)-2 in several respects in order to clarify the consequences of a failure to comply with the requirement in § 226.5(b)(2)(ii) that creditors adopt reasonable procedures designed to ensure that periodic statements for open-end credit plans are mailed or delivered at least 21 days before the payment due date and the date on which any grace period expires. First, the title of the comment would be amended to cover both treating a payment as late for any purpose and collecting any finance or other charge. Second, because § 226.5(b)(2)(ii) only prohibits the creditor from treating a payment as late for any purpose or collecting any finance or other charge as a result of a failure to comply with the general 21-day requirement, the comment would be amended to clarify that the prohibition in § 226.5(b)(2)(ii) on treating a payment as late for any purpose or collecting finance or other charges applies only during the 21-day period following mailing or delivery of the periodic statement. Thus, if a creditor does not receive a payment within 21 days of mailing or delivery of the periodic statement, the prohibition does not apply and the creditor may, for example, impose a late payment fee.

Here are a few thoughts on this issue.  First, this is a proposed amendment to the staff commentary.  It isn't final yet.  Second, it isn't clear exactly what this means.  There's still a requirement to have reasonable procedures that ensure that statements are mailed or delivered at least 21 days before the due date.  Is the only consequence of not meeting the 21-day requirement (assuming the proposed commentary becomes final) that credit unions must wait 21 days to charge a late fee, etc.?  Or could a credit union that fails to meet the 21-day requirement also be exposed to an administrative action for a violation of Regulation Z?  We are seeking to clarify this issue.

• The comment period is only 30 days from when this is published in the Federal  Register.  Ugh.
• The Fed indicates that it intends to make the effective date for this rule February 22, 2010.  That makes sense, as that is the requirement under the Credit CARD Act.  But the Fed is considering whether it wants to also make the provisions of its open-end final rule that were to take effect July 1, 2010 effective on February 22, 2010 as well, as many of those provisions are closely related to the CARD Act.  If the Fed does that, those effective dates will be moved up more than 4 months. 
• The minimum payment warning language will only apply to credit card accounts under an open-end plan.  See p. 367 et seq. Whew.
• Since the Fed has issued 4 proposed or final rules that affect open end lending in 2009, they decided to republish all sections of Regulation Z from the 4 proposals or final rules that affect open-end (non-home secured) credit. They are also including the UDAP provisions, with proposed amendments to make them jibe with the Credit CARD Act.

Deadlines...

The deadlines approaching compliance peeps are many.  It can be very difficult to keep everything straight.  With that in mind, here's some help.

Truth in Savings.   NCUA has a proposed rule to amend Part 707 of its rules and regs.  The changes would mirror the Fed's Reg DD.  Currently, only credit unions that promote their overdraft protection programs need to provide monthly and year-to-date NSF and ODP fee totals.  After this become effective, all credit unions will need to make those disclosures, whether or not they promote the programs.  While NCUA's rule is a proposal, they are mandated to keep their Truth in Savings rule aligned with the Fed's.  So this train is a'comin.

Compliance Deadline: If it mirrors Reg DD, January 1, 2010.
Here's a link to NCUA's proposal.
Here's a link to the Reg DD final rule.

On a related note, the Fed currently has another overdraft-protection-related proposal.  They have issued a proposal to amend Regulation E that could conceivably require consumers to opt-in to a financial institution's overdraft protection program for ATM and one-time POS transactions.  Access the proposal here.   Comments were due back on March 30.

RESPA.  Despite everyone and their brother asking HUD to derail their RESPA reform efforts, HUD is proceeding with the amendments to its RESPA regulation.  The changes mostly amend the GFE and HUD-1 and HUD 1-A.

Compliance Deadline: January 1, 2010.
Here's a link to a HUD page that contains a link to the final rule, forms, and other information.  Note that the "required use" provision has been yanked, and that some minor provisions of RESPA reform have already become final.

UDAP.  NCUA, along with other financial regulators, issued a final rule to amend Part 706 of its rules and regulations.  The rule creates 5 new "unfair acts and practices" related to credit cards that are a no-no.  But the wind has been knocked out of this regulation by a credit card bill recently signed by President Obama.

Compliance Deadline: July 1, 2010
Here's a link to NCUA's final rule.

Credit CARD Act of 2009.  President Obama recently signed this piece of legislation into law.  In a word: ugh.  The law codifies expands, and strengthens many of the consumer protections found within the UDAP and Regulation Z amendments. 

Compliance Deadline: It depends:

• Generally, it becomes effective 9 months after President Obama signed the bill. That is February 22, 2010.
• But two provisions become effective earlier, and warrant some attention.  The 45-day notice requirement for change-in-terms and 21-day timing requirement for billing statements both take affect 90 days after the signing, which is August 20, 2009.  Yes.  2009.

Here's a link to the Credit CARD Act of 2009.

Regulation Z.  Where to begin?  Well, how about chronologically.

Mortgage Loan Disclosures.  Thanks to the Mortgage Disclosures Improvement Act, credit unions must move up their compliance efforts concerning the disclosure requirements for certain mortgage loans.

Compliance Deadline: July 30, 2009.
Here's a link to the Fed's final rule for this requirement.
Here's a link to the FDIC's FIL on this requirement.  English! 
And the FDIC provided this supplement, which is a nice side-by-side chart. Side-by-side chart!

HOEPA Amendments.  The Fed has amended Regulation Z to put in place a ton of mortgage-related protections for consumers.  They did so under authority from the Home Ownership and Equity Protection Act of 1994.  The goal was to eliminate deceptive acts and practices for mortgage products.  Most of the provisions apply to higher-priced mortgage loans.  But not all.

Compliance Deadline: It depends.

• October 1, 2009 for nearly all the provision.
• April 1, 2010 for the escrow provisions. Unless the mortgage covers manufactured housing.  Then the deadline is October 1, 2010.

I always have a heard time finding this rule.  So here's some help.
Here's a link to the final rule from the Fed.
Here's a link to a simply fantastic overview from the Philadelphia Fed.

Open-end Amendments.  Remember when this was supposedly what we were supposed to worry about?!  Ha!  Well, this final rule that amends Regulation Z changes everything we know about open-end lending.    And this final rule contains provisions mandated by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Compliance Deadline:  July 1, 2010. 

Here's a link to the Fed's announcement, which contains links to the final rule, forms, etc.

NACHA's IAT Rule.  The IAT is a new Standard Entry Class code for ACH payments to identify international transactions.  International transactions are those payments that have been funded internationally or are being sent to another country and a part of the transaction will be processed via the ACH Network.

Compliance Deadline:September 18, 2009.

Here's a link to a great IAT resource page, developed by NACHA.

***

With that in mind, try to have a great weekend, everyone!

Credit CARD Act; Contact Us

Posted by Steve Van Beek

First things first, the language of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) is available on NAFCU's Compliance website (available to both NAFCU members and non-members).

Ok, only 33 pages.  Not so bad, right?  Unfortunately, there appears to be a trade-off where we received brevity in exchange for confusion.  Trust me, the law is much harder to read than the regulations.  

How did we get here?  Congress codified, strengthened, enhanced and moved up many of the protections that NCUA and the other federal regulators adopted in their regulation on Unfair or Deceptive Acts or Practices (UDAP - Part 706 of NCUA's Regulations).  Congress also added new restrictions on credit card accounts.     

What does this mean?  The protections on credit card accounts are now law.  The Credit CARD Act amended the Truth in Lending Act.  In contrast, the Federal Reserve (and NCUA) had adopted the UDAP regulations under existing authority under the Federal Trade Commission Act (FTC Act).  Six of one or a half dozen of the other, right?  No, again.  The fact that these protections are now codified in laws rather than regulation means they are harder to change.  

However, there is a glimmer of sun for federal credit unions.  The Credit CARD Act applies to a broader scope of institutions than the UDAP regulations ensuring each card issuer is operating on a level playing field.  For example, state-chartered credit unions were not subject to the UDAP regulations (because for unfair practices they are regulated by the FTC) but they will be subject to the Credit CARD Act.  

What do we need to do?  Review the new Credit CARD Act and determine how your card operations need to adjust to comply with the law.  The law covers a wide variety of situations, such as gift cards, credit cards to persons under the age of 21, and the timing to send periodic statements - just to name a few.  

When is the effective date?  The majority of the provisions of the Credit CARD Act become effective 9 months after President Obama signed the bill into law.  President Obama signed the Act on May 22, 2009 making February 22, 2010 the effective/compliance date for many of the provisions.  Note:  This is more than 4 months prior to when the UDAP regulations are slated to become effective (July 1, 2010).  The UDAP regulations are still scheduled to be implemented - the Credit CARD Act does not mean credit unions do not need to be follow UDAP - though the regulators may amend the UDAP regulations at a future date.

Editor's Note: The original post accidently listed February 22, 2009 as the effective date - it is, rather, February 22, 2010.

However, Congress determined that two sections of the Credit CARD Act warranted earlier effective dates 90 days after enactment - August 20, 2009.  Yes, as in 70 days from today.  

Which provisions are effective August 20, 2009?  

Section 101. Protection of Credit Cardholders. (a) Advance Notice of Rate Increase and Other Changes Required.   (see pages 2-3 of the Credit CARD Act PDF).

Advanced Notice 

Beginning on August 20, 2009, credit unions will need to send an advanced notice of (a) an increase in an APR; or (b) other significant changes - including an increase in any fee or finance charge.  The advanced notice must be 45 days before the effective date of the change.  The Federal Reserve Board will determine what "other significant changes" trigger the advanced notice.  Until the Federal Reserve provides clarity in this area, credit unions may want to use Regulation Z, 12 CFR 226.9(c), as guidance for which terms of the account might be considered significant.   

Right to Cancel

A "Right to Cancel" statement must accompany the advanced notice to the member.  The statement needs to inform the member of his/her right to cancel the account and, in effect, reject the changes.  The Federal Reserve Board is required to establish rules regarding the "Right to Cancel."  It is unclear what information would be required to accompany this "Right to Cancel" statement.  My best guess is that the credit union would need to inform the member of what canceling the account would entail (i.e. no new purchases; retain existing APR and terms; repayment options, etc.)  Additionally, the law prohibits a credit union from requiring a member who exercises his right to cancel the account to repay the obligation in full.  Rather, the credit union needs to provide a repayment method that is no less beneficial than one of the methods in Section 171(c)(2) of the Truth in Lending Act (see page 4 of the Credit CARD Act PDF).   

Section 163.  Timing of Payments.  (see page 9 of the Credit CARD Act PDF).

Credit unions need to mail or deliver periodic statements 21 days or more before the payment due date in order to charge a late fee.  Note: This section applies to all open end consumer credit plans and is not limited to credit cards.

Additionally, another section of the Credit CARD Act, Section 106 (on page 9), requires the payment due date for a credit card account to be on the same day each month (i.e. the 18th of the month).  If the due date falls on a day the credit union does not accept payments, the credit union may not treat a payment received the next business day as late.  Note: Section 106 is not effective until February 22, 2010 but credit unions should consider its impact when making any needed changes to their credit card billing cycles.

***

NAFCU will be relaying information regarding all the new rules and requirements as fast as we can.  Be on the lookout for a big overview blog posting from Anthony tomorrow summarizing many of the upcoming compliance deadlines.

NAFCU is planning a webcast on the Credit CARD Act in August, so stay tuned for information on that webcast.

As always, NAFCU members can call or e-mail us with their questions.  We have created a "Contacting NAFCU Compliance" cheat sheet that is available on our compliance homepage.  Talk to you soon.  

Credit Cards Bill and UDAP; Corporates; NCUA Board Meeting; Softball

Posted by Anthony Demangone

Here's one interesting angle of the credit card bill that I overlooked.  While the provisions within the bill are very similar to UDAP, the reach of the bill is effectively larger.  Remember, NCUA's UDAP rule only applies to federal credit unions.  The FTC could write UDAP rules, but their rule-making process is much, much slower than NCUA's or the Federal Reserve's.  The credit card bill, on the other hand,  will apply to all issuers of credit cards once signed.  And NCUA will have enforcement authority for both state and federal credit unions for its requirements.

***

Each corporate credit union is required to provide a summary of its annual audit reports to its members at its annual meeting.  NCUA has loosened that requirement in light of the current situation.  NCUA has indicated that it will not take exception to a corporate credit union not providing that summary if the audit has not been completed before the meeting.  Corporates should indicate the reason for the delay and and inform members that a copy will be provided when available.  Since members of corporates are natural person members - this will affect you.

***

NCUA held its monthly board meeting yesterday. 

• Here's a link to the results, which include the items considered by the board.
• Here's NCUA's presser on the meeting.

In the meeting, NCUA approved one of the remaining FACT Act regulations still in limbo.  (Can you believe that regulators have been issuing regs on these for 5 years now?). 

NCUA Board approved a final rule implementing the accuracy and integrity and the direct dispute provisions of the FACT Act.  The final rule requires furnishers, including credit unions, to establish reasonable policies and procedures for implementing the guidelines found within the new reg.  It also states when a furnisher must reinvestigate disputes about the accuracy of information contained in a consumer report based on a direct request from a consumer (the direct dispute regulations).

The accuracy and integrity regulations also contain definitions of key terms such as “accuracy,” “integrity,” “direct dispute” and “furnisher” and require furnishers to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of consumer information provided to a CRA.   Also included are guidelines concerning the accuracy and integrity of information furnished to CRAs that furnishers must consider in developing their policies and procedures. 

The final direct dispute regulations: 

• set forth the circumstances under which a furnisher must reinvestigate a consumer’s direct disputes
• provide exceptions to those requirements
• detail the direct dispute address and dispute notice content requirements
• specify furnishers’ duties after receiving a direct dispute; and
• establish when a furnisher may deem a direct dispute to be frivolous or irrelevant.

Effective date: July 1, 2010.  NCUA looked at other issues during the meeting, so I'd check out their presser, which is linked above.

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Updated by Steve Van Beek

Head, shoulders, knees and toes - knees and toes.  No, not the song - those are just the body parts that hurt this morning.  NAFCU softball had another split doubleheader last night.  The NAFCU Nationals won the first game with a score of 7-4 which included a defensive stand to preserve the game.  In the second game, NAFCU got down 11-3 early but clawed its way back to have the tying run on first base before falling in defeat 14-11.  After an 0-2 start to the season, NAFCU has split games the past three weeks putting our record at 3-5.  Stay tuned as we hunt down that .500 mark...

Another great team effort, including the Compliance Guy's first appearance (which include two line drive singles and an amazing play at first base to preserve the lead).  Thanks for letting him play Mandy!  Can you tell Anthony is my boss?

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Have a great long weekend, everyone.  Until Tuesday, stay compliant.

NCUA Board Meeting, NCUA Regs

Posted by Anthony Demangone

Yesterday, NCUA's Board approved a number of items.  Of note, NCUA approved a proposed rulemaking designed to clarify a number of issues with it recently issued UDAP regulation.  For those working on this issue within your credit union, access NCUA's proposal here.  NAFCU Today does a nice write-up on the entire meeting, which you can access here.

In a later, closed meeting, NCUA extended its Corporate Credit Union Share Guarantee Program.  Read about it here.

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Compliance geeks: NCUA has updated its "regulations" document.  This is the monster .pdf that houes all NCUA regulations.  The Compliance Guy visits this document more about as often as he raids the cookie jar.  Access the updated document here.  (Select the May 2008 with change 1 incorporated.)  Oh, and here's a free tip for you guys.  Do yourself a favor and download a copy of this document to your computer's desktop.  Sure, your IT guy/gal says never to put stuff on your desktop.  But your IT guy/gal doesn't have to research Truth in Savings when the Internet goes down.