WASHINGTON (6/13/12)--The Credit Union National Association (CUNA) in a comment letter agreed with the Consumer Financial Protection Bureau's (CFPB) position that it lacks the authority to regulate card fees charged before an account is opened, such as an application fee, but CUNA also warned that the CFPB's decision to regulate only fees charged after account opening could subject consumers to potentially abusive fees from non-credit union lenders.
CUNA said it believes that credit unions do not charge such fees.
The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) amended the Truth in Lending Act's (TILA) Regulation Z to, among other things, prohibit lenders from charging fees on a credit card account in the first year that exceed 25% of the account's initial credit line. This 25% limit was extended by the Federal Reserve in April 2011 to include application fees and other fees that customers could be charged before an account is opened.
This extension of TILA was challenged in court, with First Premier Bank and Premier Bankcard LLC last year filed a lawsuit against the CFPB arguing that the regulator was exceeding its authority by seeking to regulate fees that are paid before account opening.
The CFPB, which took over Reg Z authority from the Fed, has moved to amend Reg Z "to resolve the uncertainty caused by the litigation." Under the proposed CFPB amendment, the 25% fee limit would apply only to fees charged after a credit card account has been opened, for the first year of the account.
While the decision to extend the card fee limitation to address early account fees did not hold up, CUNA Deputy General Counsel Mary Dunn said that if the CFPB determines it has authority under some other statutory provisions, it should issue another proposal that would be subject to public comment.
For the full comment letter, use the resource link.