NCUA should direct its examiners that, if credit unions are making good-faith efforts to understand and determine how best to comply with the new credit card law’s requirements, they should not be subject to any enforcement sanctions related to 21-day rule for open-end plans other than credit cards, CUNA has written to Board Chairman Michael E. Fryzel.

In his letter, CUNA President and CEO Dan Mica noted the “unfortunate and unforeseen” compliance situation for credit unions with the new law, the Credit Accountability Responsibility and Disclosure (CARD) Act. He urged Chairman Fryzel to “write to your examiners on this matter now, to provide flexibility to credit unions as they struggle with these requirements.”

The rule at issue prohibits creditors from claiming a payment as late unless that creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date. The provision goes into effect Thursday (Aug. 20).

In other comments, Mica noted CUNA is seeking relief for credit unions in Congress. He pointed out it does not appear the Fed will grant a more definitive time extension for compliance. However, he reminded that both Sen. Christopher Dodd (D-CT) and the Consumer Federation of America “have acknowledged the extreme compliance difficulties credit unions are experiencing.”

Mica also stated CUNA is “laying the groundwork” to limit the scope of the CARD Act’s 21-day rule during the August recess with Members of Congress in their districts and with key staff on Capitol Hill.

The complete text of the letter follows:

- - - - - - - - - - - - - - - - - -

August 17, 2009

The Honorable Michael Fryzel
Chairman
National Credit Union Administration Boardv 1775 Duke Street
Alexandria, VA 22314-3428

Dear Chairman Fryzel:

On behalf of the Credit Union National Association, I want to thank you for sending a letter to Federal Reserve Board Chairman Ben Bernanke, noting the extreme compliance difficulties most credit unions are experiencing in trying to meet the August 20,
2009 effective date of aspects of the new Credit Accountability Responsibility and Disclosure (CARD) Act. More specifically, as you noted, a number of credit unions have found the 21-day rule requirements, as they apply to open-end lending programs other than credit cards, to continue to present extremely challenging compliance concerns, particularly in light of the effective date later this week.

As we have been informed, credit unions are ready to comply with the new provisions regarding credit cards, which were months in the development. However, given the extremely short amount of time to become aware of and implement the requirements effective this month regarding other open-end plans, a number of credit unions, small and large, around the country are finding it extremely difficult to meet the 21-day rule requirements of the Federal Reserve Board’s interim final regulation. We also understand that some credit union statement processors are expressing great difficulty in facilitating compliance.

CUNA has been aggressively seeking relief for credit unions at the Federal Reserve Board and in Congress. While it does not appear that the Fed will grant a more definitive extension of time for credit unions to comply, other than the “short period”
alternative it has already provided, that agency as well as Sen. Christopher Dodd (D-CT) and the Consumer Federation of America have acknowledged the extreme compliance difficulties credit unions are experiencing.

This information is very useful in our efforts to urge Congress to limit the scope of the CARD Act’s 21-day rule to credit cards. We are proactively laying the groundwork for this result during the August recess with Members of Congress in their districts and with key staff on Capitol Hill.

Meanwhile, in light of the unfortunate and unforeseen compliance situation within the credit union system, we urge you as National Credit Union Administration Chairman to write to your examiners on this matter now, to provide flexibility to credit unions as they struggle with these requirements. More specifically, particularly for credit unions examined within the next several months, NCUA should direct its examiners that, if the credit union is making good faith efforts to understand and determine how best to comply with the requirements, the credit union should not be subject to any enforcement sanctions regarding the 21-day rule for open-end plans other than credit cards.

There is no question that the CARD Act is inflicting a significant toll on the credit union system. In recognition of this and the range of other issues credit unions are facing, including the sagging economy and funding for NCUA’s corporate stabilization program, we urge you to direct NCUA examiners to work with credit unions as they reasonably determine what is their best approach for compliance.

Thank you for your timely attention to this request.

Sincerely,
Daniel A. Mica
President and CEO
Credit Union Natl. Assn.
Washington, DC

Cc:
NCUA Board Member Gigi Hyland
NCUA Executive Director David Marquis
NCUA General Counsel Robert Fenner