Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive

Washington

Inside Washington (04/25/2011)

 Permanent link
* WASHINGTON (4/26/11)--The Treasury Department said in a report that the Public-Private Investment Program (PPIP), created in 2009 to allow the government and investment firms to buy assets from banks, earned about $1.7 billion in the first quarter (The Hill April 25). PPIP brought in about $523 million in cumulative equity distributions and around $1.2 billion in unrealized gains, according to Treasury. Public-private investment funds had withdrawn about $20.9 billion--or about 71%--of the $29.4 billion in debt and equity capital that had been committed to the program, according to the report. Treasury previously had announced PPIP’s 2010 fourth-quarter gains at $314 million in cumulative equity distributions and $1.08 billion in unrealized gains …

Fed clarifies portions of new TILA rules

 Permanent link
WASHINGTON (4/26/11)--The Federal Reserve Board in Monday’s Federal Register made final a number of clarifications to its Credit Card Accountability Responsibility and Disclosure (CARD) Act. The clarifications relate to the Fed’s final rule and are intended to help card issuers more fully understand their compliance obligations under changes to Regulation Z. The Fed had released the clarifications in a proposed rule that was issued in early November 2010. Specifically, the clarifications state:
* Promotional programs that waive interest charges for a specified period of time are subject to the same protections as promotional programs that apply a reduced rate for a specified period. For example, a card issuer that offers to waive interest charges for six months would be prohibited from revoking the waiver and charging interest during the six-month period unless the account becomes more than 60 days delinquent. * Application and similar fees that a consumer is required to pay before a credit card account is opened are covered by the same limitations as fees charged during the first year after the account is opened. Because the total amount of these fees cannot exceed 25% of the account's initial credit limit, a card issuer that, for example, charges a $75 fee to apply for a credit card with a $400 credit limit generally would not be permitted to charge more than $25 in additional fees during the first year after account opening. * When evaluating a consumer's ability to make the required payments before opening a new credit card account or increasing the credit limit on an existing account, card issuers must consider information regarding the consumer's independent income, rather than his or her household income.
The clarifications will become effective on October 1. The Fed noted, however, that financial institutions may comply with the final rule ahead of that effective date. The CARD Act, which was enacted in May 2009, made a series of changes to credit card rules, which were implemented under Reg. Z Truth in Lending rules. For the full release, as published in the Federal Register, use the resource link.

Compliance Existing balances maintain fixed rates

 Permanent link
WASHINGTON (4/26/11)--Non-variable rate credit card accounts with outstanding balances must continue to have that same non-variable rate apply to the outstanding balance, even if a credit union converts the account to a variable-rate card. The variable rate must only be applied to new transactions, according to the Credit Union National Association (CUNA). In this month’s Compliance Challenge, CUNA notes that Section 226.55(d)(2) of the Federal Reserve’s Regulation Z prohibits lenders from changing the rate on a credit card outstanding balance unless one of the exceptions applies. This is true even when the balance is transferred from the current account to another credit card issued by the same creditor or the account is closed or is acquired by another creditor. The exceptions include the completion of an introductory or promotional period, a variable-rate plan based on an index that is not under the control of the creditor, the completion or failure to complete a workout arrangement, or the account becomes 60-days delinquent. These rules do not apply to Home Equity Lines of Credit (HELOC). Card issuers may not change the annual percentage rate on a HELOC unless the rate change is based on an index that is not under the card issuer’s control and is available to the general public. While the above restrictions are imposed under Reg Z, that regulation also allows financial institutions to change a non-variable rate to a variable rate upon expiration of a specified period of time, CUNA adds. For more of this month’s Compliance Challenge, use the resource link.

Delay needed on prepaid card rule CUNA urges

 Permanent link
WASHINGTON (4/26/11)--The Credit Union National Association (CUNA) in a comment letter has urged the U.S. Treasurys Financial Management Service to delay mandatory compliance of pending prepaid debit card rules by at least six months. The proposed delay would give credit unions the time needed to deal with the prepaid debit card rules and what CUNA termed the "tremendous uncertainty" regarding the regulation of debit card interchange.

The Federal Reserves final rule, which is expected to impose a debit fee interchange charge cap of a maximum of 12 cents per card swipe, is set to be released before July 21. However, legislators are promoting bills that would delay the implementation of the rule for as long as two years.

CUNA in the letter said that credit unions and other financial institutions will need time to deal with this rule while they are adopting new ACH codes, providing appropriate staff training, and implementing the processing changes. The interim final rule would permit credit unions to offer prepaid debit cards to receive Federal benefit payments if those cards are:

Offered by a federally-insured credit union;

Set up to meet the requirements for pass-through share insurance by the National Credit Union Share Insurance Fund;

Not attached to a line of credit or loan agreement where the delivery of Federal payments would trigger repayment; and

In compliance with all requirements that currently apply to payroll cards under Regulation E.

CUNA does not support provisions that would make financial institutions liable if they receive Federal payments on prepaid cards not intended for Federal benefit payments, as long as they take reasonable measures to identify Federal benefit payments, such as with the new ACH codes.

CUNA also urged the Treasury to minimize potential compliance costs for credit unions and said that the regulator could work with credit unions and other financial institutions to obtain operational and compliance guidance. CUNA suggested that this guidance could address prepaid cards and loan agreements and related disclosures.

For the full comment letter, use the resource link.