Grasshoppers, Ants, and the CARD Act

by Ron Daly 

Remember the story of the grasshopper and the ant? The grasshopper sat back and didn't worry about winter until it was too late, the ant clambered to get more food to outlast the cold. In the end, the ant gets all his food and preparations in order, and winter never even comes and everyone's fine. 

Wait, that doesn't sound right. Wasn't the grasshopper supposed to be, quite literally, left out in the cold? Didn't all that preparation pay off for the ant who worked so hard to get it done? Maybe I'm thinking of the wrong story. Maybe I'm thinking of all the credit unions who worked to get their statements and documentation around HELOCs, Personal LOCs, and open-end credit adjusted to comply with the Credit CARD Act of 2009...and the CUs who somehow came out ahead by not trying to comply or waiting out the change to the bill. Doesn't sound fair? Few things are these days when it comes to regulation. 

Let's jump in the Wayback Machine and go back to July 30 of this year, one of our most commented blog posts ever: "Caught by the Fan!" We drew a lot of commentary and thoughts from the people who know a thing or two about compliance. Friends-of-blog Anthony Demangone and Rob Rutkowski were kind enough to peel away a few more layers on the problem and talk about exactly what the legislation would do to CUs. 

But just recently, Congress (prodded by the trade groups and lobbies) produced the CARD Act Technical Corrections Act (H.R. 3606), making clear that the rules only applied to credit cards. 

From CUNA News Now - 

The new CARD Act law fixes a situation that has been plaguing credit unions since the original Credit Card Accountability, Responsibility and Disclosure (CARD) Act was signed in May. That bill incorrectly implied that a 21-day late notice requirement applied to all open-end credit, and the Credit Union National Association (CUNA) has argued that it had always been lawmakers' intent to apply the provision only to credit cards. 

The corrections bill states clearly that the late-notice provision applies only to credit cards.

I know there were a lot of CUs out there who had to work at compliance and spend a lot of money to bring open-end lines of credit in compliance by August 2009. In hindsight, those financial institutions that took no action on the unintended consequences of the CARD ACT and waited for the CARD fix turned out to be ahead of the game (money, time and worries). So if we know that a regulation is blatantly wrong and a fix is coming, is it better to be a grasshopper or an ant?

Comments

[Travis Carnahan]

The Ant...it snows in Florida from time to time. Just because one obvous error is corrected does not mean that others will be corrected.