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Compliance CUNA answers CARD Act credit concerns
WASHINGTON (2/16/10)--In this month's Compliance Challenge, the Credit Union National Association (CUNA)addresses whether the Federal Reserve's recent Regulation Z final rule, which covers provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 that become effective on Feb. 22, contain any exceptions for share-secured credit card accounts with regard to determining an underage consumer's "ability to pay." According to CUNA, there is no exception to the rules that soon will restrict creditors from opening a credit card account for a consumer under the age of 21. Such an account will be prohibited unless that young consumer submits a written application, obtains the signature of a cosigner, guarantor, or joint applicant who is at least 21 and has the means to repay the debt and agrees to joint liability, or proves that the consumer has the income needed to make the required payments. These rules would apply to all credit card accounts, including share-secured credit card accounts. Regarding Regulation E rules that address overdraft fees, CUNA has indicated that credit unions may begin to collect consent forms for members to opt-in to overdraft services, provided they clearly communicate the effective date of the change, which will take place on July 1. As of that date, credit unions will be required to provide an opt-in notice and obtain the member’s affirmative consent before charging any fees for paying ATM and one-time debit card overdrafts. A separate deadline of August 15 will apply to accounts that are opened before the July 1 compliance date. The Compliance Challenge also addresses another Fed rule, Regulation B, which does not require credit unions to send an adverse action notice if a member requests a reduction in their line of credit, according to CUNA. Currently, Regulation B would require an adverse action notice if there is a refusal to grant credit in substantially the amount or on substantially the terms requested in an application, absent a counteroffer from the credit union. A refusal to increase the amount of credit available to an applicant that has applied for an increase would also trigger an adverse action notice, according to Regulation B. Changing the terms of a given account, as agreed to by the applicant, would not cause a credit union to file an adverse action notice, CUNA said. For the full Compliance Challenge, use the resource link.
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