, the Credit Union National Association’s (CUNA) newest addition to its electronic information toolshed for members, has started a conversation about what credit unions should focus on in the changes the Federal Reserve made this spring to its Regulation Z. The blog says that although it does not take effect until October 1, the Fed’s amended rule carries significant changes and credit unions should be aware of such things as new provisions addressing “floor” rates, preferential rates for employees, consumer’s ability to pay, reevaluation of rate changes and a new definition of “significant terms”. Last week CompBlog
took a look at “floor” rates and “ability to pay,” and promised more Reg Z postings to come. On fixed-minimum, or “floor” rates, the blog notes such things as;
* Under an “Advance Notice Exception” provision, a creditor isn’t required to provide a notice of change in terms for open-end loans for an increase in a variable-rate APR if the bump up is due to an increase in an index that was previously disclosed, isn’t under the control of the creditor, and is available to the general public; * However, a variable-rate plan that’s subject to a fixed minimum or “floor” doesn’t meet the conditions of the exception to the advance notice requirements in Reg. Z Section 226.9(c)(2)(v)(C); and * Supplemental material to the final rule clarified that a 45-day advance notice of change in terms is required for all open-end loans (except HELOCs) prior to a rate increase on a variable-rate account that’s subject to a fixed minimum or floor.
On Reg Z changes to a credit cardholder’s “ability to pay,” the Fed final rule requires a card issuer to consider a consumer’s independent ability to make required payments on a credit card account, regardless of the consumer’s age, before opening a new card account or increasing the credit limit on an existing account. Outside of community property states, a card issuer may not rely solely on “household income” provided by an applicant on a credit card application, but will need to obtain additional information about the applicant’s independent income. Information concerning the applicant’s “income” or “salary”, however, may be relied on in order to determine whether the applicant has the ability to make the required payments. Use the resource link below to access CUNA’s CompBlog
(members only) and read the Reg Z posts in their entirety. The conversation on Reg Z continues today.