Caught by the Fan!

by Ron Daly 

Not too long ago we were all high-fiving over the passage of the Credit Card Act of 2009 and the screws it was going to put to the banking vultures taking advantage of our members & potential members (Click here for a summary of the bill). We were standing behind the fan as the credit card mess hit it and got all over the bankers. Guess what, folks? It was an oscillating fan, and has swung back around and gotten all over our beloved Credit Union Industry. 

By now you’re probably thinking that the summer heat in D.C. has finally taken a toll on me. You’re somewhat right because I’m steamed over what section 106 of the act is doing to credit unions right now. You see, the act was designed to protect consumers from lender practices of jacking rates and moving due dates. A closer look at the Act sees that Section 106 applies to all open-end credit, not just credit cards. That means your Home Equity Line of Credits, Signature lines of credit and overdraft protection lines of credit (courtesy pay???) are all impacted and have a compliance deadline of August 20, 2009. 

Credit unions are scrambling for information and CUNA had over 2500 folks on their audio call this week (click here for more info) trying to figure out how to comply with statement delivery. Here’s what I can share with you from our client base for those that have open-end LOCs other that credit cards: 

• Some clients are moving their statement printing dates to make sure they are printed and postmarked 21 days from the due date. These CUs are lucky enough to have not let members pick their own due dates. 
• Some are looking at consolidating all due dates into the same date 21 days ahead of their average postmark date for all LOCs. If your statements hit the mail by the 5th then a due date of 26th-EOM would work) 
• Some are leaving due dates alone and are creating additional statement cycle dates throughout the month (i.e. splitting the one mailing on the first into six different mailings) and dropping accounts with LOCs into these categories
• Other are studying just how much do they collect in late charges on these LOCs and is the frustration and expense REALLY worth collecting a few dollars?
• Some have separate billing statements for LOCs (even though they are combining on your statement now by printers, they might be two files at first) and are putting them online as eStatements on the first as well as mailing. Sending email notice when loaded.

All this over collecting late fees... wouldn’t it be nice if people just paid their bills on time?

Share what you are doing with the industry here.  

P.S. Hey, what a great opportunity for electronic statements. Always available, delivered on the 1st and you can prove that the member opened them!

Comments

[Anthony Demangone]

Hi Ron,

I just wanted to clarify that it is more than just being able to charge late fees. The true requirement of this 21-day issue is that unless you meet its requirements, you may not treat a loan as late for any reason. Hmmm. What does that mean? No late fees. No rate increases. No reporting to credit bureaus. And what about collection and repossession rights of creditors? That wasn't addressed, but it is something to think about seriously. We've been hammering this issue for the past month and a half at the NAFCU Compliance Blog. Feel free to stop by and check out our section-by-section analysis. And anyone can sign up to receive a daily email from the blog. More than 1,000 do so each day. - Anthony

[Ron Daly]

Thanks for the additional info Anthony. As an ex-CFO, I sometimes focus on the $$$ side. Add one more reader to you email list cause I just signed up. Here is the link for others interested in doing the same.

http://www.nafcucomplianceblog.typepad.com/

[Connie Prater]

I just wanted to point out that on July 15 the Fed issued interim final rules on the Credit Card Act that make it clear that HELOCs, signature loans and other non-credit card forms of open-end credit are NOT subject to the Aug. 20, 2009, compliance date. See pages 26-28 in the Fed's rules: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090715a1.pdf.

[Anthony Demangone]

Excellent, and thanks. I'm a subscriber to your blog as well. As I like to say, good stuff. Very good stuff.

[Rob Rutkowski]

Jimmy Marks and I were talking about the applicability of the 8/20 rule to non-credit card open end lending. Anthony Demangone answers the question quite nicely on his blog http://tinyurl.com/mnhaw5
There are some other side issues and we discuss them on this month's CIiCU. www.ciicu.com.