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CUNA supports a careful crack down on unfair practices
WASHINGTON (8/6/08)—The Credit Union National Association (CUNA) supports a federal regulatory proposal to crack down on unfair and deceptive credit card practices, but warned in a recent comment letter that there are operational and practical concerns associated with the current plan. CUNA's comments followed a letter CUNA President/CEO Dan Mica sent last week to Rep. Carolyn Maloney (D-N.Y.), chairwoman of the House Financial Services subcommittee on financial institutions and consumer credit regarding legislation that contains provisions similar to those in the regulatory proposal. If adopted, the regulatory proposal would prohibit or limit seven practices relating to credit card practices and two practices regarding overdraft protection plans. It was issued jointly by the National Credit Union Administration (NCUA), Federal Reserve Board, and Office of Thrift Supervisions under the Federal Trade Commission Act which authorizes these agencies to regulate unfair and deceptive practices. CUNA will send it comments to all three regulators. CUNA wrote, “As the only consumer owned cooperatives in the financial marketplace, credit unions have a strong tradition of protecting consumer interests.” The letter added that regulatory action on these issues is necessary and appropriate because some in the financial marketplace have been subjecting consumers to predatory practices. “We commend the regulators for developing the proposal,” wrote CUNA Deputy Counsel Mary Dunn. However, Dunn warned that CUNA has operational and practical concerns about how some of the provisions will be implemented and whether they will result in unintended, negative consequences for credit unions and their members. “We feel it is reasonable for Congress and the regulators to consider how best to shield consumers but without continually adding new requirements that fail to recognize the existing level of regulatory burden,” the letter said. CUNA took the opportunity in its comment letter to recommend a “modified pay-go” approach for all new regulations, meaning that whenever an additional burden is imposed, it must be paired with an existing requirement that the regulators may eliminate or that Congress will review for removal. CUNA noted that its comments on the credit card and overdraft proposals reflect broad participation from the credit union system. The top issue of concern, measured by the number of comments, addressed the provisions on overdraft protection plans. Specifically, the plan’s opt-out rights, disclosures and overdrafts due to debit holds, received the most comments from CUNA members. CUNA recommended that two consumer-oriented practices in which a number of credit unions engage in should not be covered by all of the provisions of the proposal. These are overdraft accommodations and opt-in protection plans. If these practices are covered by the proposal’s full notice and disclosure requirements, “which were designed to prevent consumer abuses that do not exist with these accommodations,” they will likely be discontinued, in which case credit union members will be disadvantaged, CUNA wrote. CUNA also raised concerns about the prohibition on changing the interest rate on outstanding balances. While CUNA noted that, "(c)redit unions do not want to raise interest rates to gouge their members," Dunn noted that the prohibition does raise concerns about its impact on asset liability management, "particularly at a time when examiners are focusing increased attention on ALM." CUNA urged the regulators to take these considerations into account when developing the final rule. Use the resource link below to read CUNA’s complete comments.


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