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Fed Reg Z plan has clarification for CUs
WASHINGTON (3/16/09)—The Federal Reserve Board has issued its proposal to implement new disclosure requirements for private education loans, and the plan carries a fix to a provision that could have been problematic for some credit unions. The proposal sets disclosure rules required under the 2008 Higher Education Opportunity Act, which requires lenders and colleges to adopt strict codes of conduct for their student lending programs. It applies to private loans made “expressly for postsecondary educational expenses but would not apply where educational expenses are funded by credit card advances, or real-estate-secured loans.” It doesn’t apply to education loans made, insured, or guaranteed by the federal government—which fall under separate rulemaking authority. The law prohibits lenders from the use of a name or logo of an educational institution in marketing student loans in a way that would imply the institution’s endorsement of the lender. If the institution’s name is used, it would require a disclosure that the institution does not endorse the creditor's loans and that the lender is not affiliated with the institution. This could have presented a problem and additional disclosure requirements for credit unions that use the names of colleges or universities. The Credit Union National Association (CUNA) sought and received statutory language to provide credit unions that are named for a university sufficient latitude to market their student loans. The Fed proposal clarifies that this will not be an issue for these types of credit unions. The public comment period will end 60 days after the proposal is published in the Federal Register, which could be as early as this week. Use the resource link below to read more of the Fed plan.
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