Fed to CUNA: CUs have some leeway on 21-day rule

WASHINGTON (8/19/09)--The Federal Reserve Board on Tuesday reiterated that credit unions will be allowed to be technically "inconsistent" with the 21-day requirement under the new Credit Accountability, Responsibility and Disclosure (CARD) Act for a "short period of time."

In a Tuesday letter to Credit Union National Association (CUNA) President/CEO Dan Mica, the Fed said that during the undefined "short period of time," credit unions may prominently disclose on or with their statements that the consumer's payment will not be treated as late if it is received within 21 days after the statement was provided.

This approach allows credit unions flexibility in meeting their compliance responsibilities regarding the 21-day rule for open end plans other than credit cards for a reasonable period of time after August 20. It also allows them to treat a payment as late if the disclosure was provided but the payment was not received within the 21-day period.

Section 106 of the CARD Act, as written, specifically prohibits creditors from claiming a payment is late unless the creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date.

The Fed said that while it understands the difficulties that the 21-day requirement creates for credit unions, "it would not be appropriate for the Board to deviate from the clear and unambiguous statutory requirements." The Fed's letter indicates the agency feels it has no leeway to provide further relief for credit unions.

Responding to the letter, Mica said that while the approach detailed by the Fed "provides more time for CUs to comply" and grants CUNA and associated credit union leagues more time to "work on achieving a legislative solution," CUNA recognizes that "more permanent relief is needed" and is seeking such relief through ongoing discussions with legislators and the National Credit Union Administration.

CUNA has been aggressively seeking relief for credit unions and discussing their compliance concerns with the requirement with both the Federal Reserve Board and Congress. In addition to pursuing legislation to limit the scope of the 21-day rule to credit cards -- which will be difficult to achieve and cannot be attained at least until after Congress returns in September -- CUNA has also written to NCUA board Chairman Fryzel to urge enforcement flexibility. (See related story: CUNA urges leniency on CARD Act exam issues)

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