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Compliance Reg Z guidance for CUs with card rate floors
WASHINGTON (1/29/10)—As reported earlier (News Now Jan. 20), the Federal Reserve Board surprised everyone when it included in the official staff commentary accompanying its final Regulation Z rules a new prohibition that will not allow a credit union to offer a variable rate card account with a floor that prevents the rate from decreasing consistent with reductions in the independent index. The Credit Union National Association (CUNA) has discussed this issue with Fed staff, specifically the implementation issues, the requirements to send change-in-terms notices, and how they can comply with a 45-day notice requirement when the Feb. 22 effective date is just weeks away. In a memo to credit unions, CUNA discusses two options that credit unions have to consider. The first option is when the credit union decides to convert its current variable rate to a fixed rate, which will apply to existing balances, and to establish a new variable rate, with a higher margin but without a floor, for new purchases. The memo explains when a change-in-terms notice is necessary and when a required notice needs to be sent. The second option is when the credit union decides to keep its current variable rate card but to eliminate the existing floor. The memo describes the Regulation Z requirement and notes why this approach may be of interest to some credit unions. This issue will be discussed on CUNA’s audio-conference scheduled for next Tuesday, Feb. 2 at 1:00 p.m. CT on the new Credit CARD Act regulation. See the resource links for more information and registration.


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