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NCUA issues reg alert on 21-day rule

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ALEXANDRIA, Va. (8/20/09)--The National Credit Union Administration (NCUA) has issued it’s Regulatory Alert 09-RA-07 to aid federally insured credit unions as they deal with the process of implementing the Federal Reserve’s interim final rule amending Regulation Z and provisions of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009. According to the NCUA, the regulatory alert includes the Fed’s “suggested temporary remedy” of providing a disclosure stating that payments received within 21 days of the mailing of the notice will not be considered late. The Fed has said that this disclosure can be provided as a part of or alongside the usual periodic account statement. Additionally, the alert summarizes portions of the new rule and provides a link to the full text of the rule, as published in the Federal Register, and the full text of the CARD Act. The NCUA alert also encourages readers to “begin preparing for the remaining revisions and amendments” that will become effective in 2010. For the full NCUA Regulatory Alert, use the resource link.

21-day rule CUNA urges CUs document everything

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WASHINGTON (9/20/09)--Starting today, periodic statements sent to members on their open-end loans must be provided at least 21 days before the payment due date in order for a credit union to charge a late fee, report the account as delinquent to credit bureaus, or impose a penalty interest rate. "The application of this Truth-in-Lending Regulation Z provision to all open-end credit presents significant compliance challenges in making changes to credit union lending programs that have been in place for over a quarter of a century," says Kathy Thompson, Credit Union National Association (CUNA) senior vice president of compliance. "This 21-day requirement, imposed by the new Credit Card Accountability, Responsibility and Disclosure (CARD) Act, applies not only to credit cards, but to all loans credit unions make using open-end lending forms, including unsecured lines of credit, home equity lines of credit—HELOCs--signature loans, automobile loans, and more." When the Federal Reserve Board published its interim final regulations on July 22, it acknowledged that "it may be difficult for some creditors to update their systems to produce periodic statements by August 20, 2009 that disclose payment due dates...consistent with the 21-day requirement." Therefore, the Fed's interim rule allows credit unions "for a short period of time" to prominently disclose elsewhere on or with the periodic statement that the member's payment will not be considered late if received within 21 days after the statement is mailed or delivered. CUNA is sending the first of two comment letters to the Fed today and that letter, in part, urges the agency to be clearer and define its "short period of time" term. “A reasonable interpretation of the phrase ‘short period of time’ is the time necessary for credit unions to make needed changes to be in compliance,” CUNA tells the regulator. CUNA says this could vary for each credit union and could be three months, six months or somewhat longer depending on the credit union's situation. CUNA and leagues are also pursuing legislation to limit the 21 day rule to credit cards or obtain much more time for compliance. CUNA’s Thompson reiterates, "Credit unions are struggling to comply with this complex requirement under a very tight timetable." She adds, "Since there was no notice and comment period that typically occurs before issuance of a final regulation, the Fed apparently does not understand that there are operational considerations far beyond reconfiguring the monthly statement." Late payments can trigger automated late payment notices, transfers of funds from other accounts, and other actions, all based on the payment due date programmed into the credit union's system. There are also contractual problems, such as with biweekly payment arrangements, that have to be addressed for credit unions to be in compliance. Recognizing that many credit unions cannot possibly have programs in place immediately that conform to the new regulation, CUNA urges that credit unions document everything they are doing to make a good faith effort to build a program to comply with the 21-day requirement. "This will include discussions with data processors, forms suppliers, attorneys and others about what is required, what changes need to be made, and how long it will take to execute those changes," advises Thompson. "Tracking your compliance efforts will not only be useful in responding to any examiner inquiries, but also important if the credit union ever finds itself under attack in court for failing to comply with this provision within weeks of release of the interim regulation." Credit unions have asked what is acceptable language to add to their periodic statements if they are unable to reprogram their systems for periodic statements mailed this fall. The Fed did not provide model language. "Certainly, the language does not have to be lengthy, but it must be prominent," emphasizes Thompson. Depending on what a credit union's system may accommodate, CUNA suggests possibilities on the periodic statement itself include:
* Putting the notice near the top of the periodic statement; * Printing it in colored ink; * Putting it in capitals; or * Surrounding it by asterisks.
Further, according to CUNA, if a mailing includes a postmark, the special notice on the periodic statement could read: "We will not consider your payment late if it is received within 21 days of the date on the postmark, regardless of payment due date(s) printed on this statement." Or, with or without a postmark, the credit union could state: "We will not consider your payment late if it is received by SPECIFIC DATE, regardless of the payment due date(s) printed on this statement." The Fed requires credit unions to have reasonable procedures to determine when statements are actually to be mailed by or on behalf of the credit union -- then the credit union will add 21 days to that expected mailing date to fill in the blank. CUNA has assembled a number of frequently asked questions (see resource link below) including what a credit union might consider a "short period of time" for how long it may continue to use the special notice on or with its periodic statements. CUNA's resources also include information on the other provision in the Credit CARD Act that goes into effect today that only applies to credit cards. That provision requires change-in-term notices be provided at least 45 days in advance before increasing the annual percentage rate (APR) or changing significant terms in the credit card agreement, rather than the current 15-day notice period.

Inside Washington (08/19/2009)

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* WASHINGTON (8/20/09)--Swiss bank UBS agreed Wednesday to disclose the names and account details for more than 4,450 Americans suspected of tax evasion (The New York Times Aug. 19). Thousands of names are expected to be disclosed, bringing the total of UBS-related names released to the Internal Revenue Service (IRS) to 10,000. The Swiss government will work with other Swiss financial institutions to release the identities of Americans who have hidden money offshore. UBS plans to notify the clients whose names will be disclosed. Recently, some Americans have disclosed their secret accounts to the IRS to avoid penalties and prosecution. Federal prosecutors have suspected UBS, the world’s largest private bank, of selling tax evasion services to many wealthy Americans ... * WASHINGTON (8/20/09)--Financial observers are nearly certain that the Federal Deposit Insurance Corp. (FDIC) will charge banks a second special deposit insurance premium. The FDIC warned in May that a second assessment could be charged. Since then, 43 banks have failed, costing the insurance fund $8 billion. The FDIC has not said how much it would charge, but the fee likely would be based on the ratio of reserves to insured deposits. In May, the ratio was 0.27%--88 basis points below the minimum (American Banker Aug. 19). The FDIC is expected to give a second-quarter report on the banking industry Aug. 27 ... * WASHINGTON (8/20/09)--Twenty-four state attorneys general sent a letter to financial services lawmakers supporting the Obama administration’s proposed Consumer Financial Protection Agency. In the letter, the attorneys general urged the administration to retain a provision that would give the states increased power. Under the plan, states could enforce tougher rules than the consumer agency and also enforce state and federal consumer protection laws against national banks (American Banker Aug. 19) ... * WASHINGTON (8/20/09)--Commerce Secretary Gary Locke and Small Business Administration (SBA) Administrator Karen Mills will lead efforts to ensure that minority-owned and small businesses have increased access to federal government contracting opportunities. Under the plan, federal agency procurement officials will participate in more than 200 events during the next three months to share information on government contracting opportunities--including those under the American Recovery and Reinvestment Act. Beyond the 90 days, Commerce and the SBA will monitor and track the impact of their efforts for small businesses. “Small businesses employ half of the nation’s private sector work force; create a large share of the nation’s new jobs and introduce many groundbreaking ideas into the marketplace,” said President Barack Obama ...

Fryzel encourages defense CUs leadership

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ALEXANDRIA, Va. (8/20/09)--National Credit Union Administration Chairman (NCUA) Michael Fryzel recently noted the defense credit union community’s leadership in combating predatory lending outlets located in close proximity to military bases across the country. Addressing the annual meeting of the Defense Credit Union Council in San Francisco, Fryzel encouraged defense credit unions to continue their strong role. “Defense credit unions have done some of the most effective and impressive work to help keep consumers away from predatory practices, that are in evidence around our nation’s military bases. Your organization has worked with NCUA over the years in supporting changes to the law that help military personnel in this area, and we appreciate your continued support,” Fryzel told attendees. He added, ““I encourage you to continue to point the way for the rest of the credit union industry as we all work together to make sure that consumers continue to have real choices, and are able to get a fair deal in financial services.”