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Compliance What an accelerated CARD ACT date would mean
WASHINGTON (10/1/09)—Credit unions, faced with the specter of a bill that would accelerate the effective date of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, have been seeking guidance on what should be done now to prepare for the possibility, said Kathy Thompson, Credit Union National Association senior vice president for compliance. Credit unions are worried, Thompson said Wednesday, about how they could possibly comply with the CARD Act if Congress were to pass legislation introduced last week to change the effective date to Dec. 1 of this year, rather than the Feb. 22, 2010 deadline in the law enacted last May. “We’ve received calls from credit unions asking what they should be doing right now if the effective date were accelerated by almost three months,” reports Thompson. “It’s something we have taken a close look at and CUNA has concluded that it would be virtually impossible for card issuers to comply with all the changes required by the new law in a matter of 60 days. “Data processing changes are still being developed and need to be tested, and implementing Regulation Z changes were just proposed two days ago. The Regulation E amendments required by the CARD Act to impose restrictions on gift cards haven’t even been proposed. Many steps need to be taken before being able to comply with the new law in any orderly fashion.” Key members of the U.S. Congress have expressed concerns about large banks rushing to make changes in the terms and conditions of their credit cards prior to the February date. Last week, Rep. Carolyn Maloney (D-N.Y.) introduced H.R. 3639, the “Expedited CARD Reform for Consumers Act of 2009,” a vehicle to move up the effective date. “I was surprised to see a quote from a supporter of a December 1 effective date saying that such a change would only affect large financial institutions because ‘small financial institutions don’t issue credit cards.’ “Half of the nation’s credit unions issue credit cards. Accelerating the effective date could raise even greater compliance concerns for credit unions because they don’t run their own credit card operations and therefore can’t simply pour more resources into their programs to comply on short notice. They rely upon third-party vendors to provide necessary support, and these vendors are working diligently to comply by the early 2010 effective date,” noted Thompson. She advised credit unions to focus on the 800-page proposed credit card regulation and explanatory materials released by the Federal Reserve Board this week, rather than trying to anticipate potential compliance problems if the effective date were moved to December. “Right now, we urge the 4,000 credit unions with credit card programs to provide CUNA with input on the practical problems you see with the Fed’s credit card proposal,” Thompson urged. Once the Fed formally issues its proposal, there is only a 30-day turn around for comments, so October is the time to focus on what additional guidance is needed from the Fed. Also credit unions should be considering what changes may be needed in their credit card programs to address issues raised in the credit card law, such as fixed versus variable rate cards, credit for members under 21 years of age, and over-the-limit transactions, to be ready for the CARD law's implementation, noted Thompson. Thompson reminded credit unions that not only the controversial 21-day mailing requirements but also the 45-day change-in-terms notice requirements have already gone into effect. “And one other provision in the new credit card law – although it doesn’t actually go into effect until next summer – requires credit unions to start tracking any interest rate increases they make in members’ credit card accounts since January 1, 2009 due to market conditions or a member’s risk profile,” warned Thompson. Starting August 22, 2010, the credit union will have to review these accounts at least every six months to assess whether a reduction in the interest rate is warranted.” Thompson emphasized that if a bill to accelerate the effective date begins to gain traction in Congress, CUNA and the leagues will meet with lawmakers and their staff to explain the regulatory burden and potential liability to credit unions. Even if Congress doesn’t take action to move up the effective date of the credit card law, it will be closely watching what is happening. The Fed is required to deliver to Congress next May a study on creditors’ practices in raising interest rates or reducing credit limits since 2007, and to report every other year on the impact of the new credit card law has on consumers.


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