The "Unintended" Compliance Consequences of the CARD Act Continue to Grow

On May 22, 2009, President Obama signed the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 into law. This law developed as a Credit Cardholders’ Bill of Rights, was intended to protect consumers from unsavory practices in credit card programs. This act protects consumers from confusing or misleading terminology, retroactive interest rate increases on existing card balances, prepayment penalties, greater advance notice of changes in credit card terms, and fewer penalties and late charges.

The interim final rulemaking by the Federal Reserve was published on July 15th. Only this week have the full compliance implications begun to surface. The bill’s reach is much greater than credit cards; all open end lines of credit are affected. Just one example: at March 31, 2009 over 5,230 credit unions offered home equity lines of credit.

The first implementation date driving the widespread concern is the August 20th initial compliance deadline for providing a 21 day notice for a periodic payment.

Because credit unions frequently have multiple lines of credit products and various statement mailing procedures complying has become a much more complex undertaking than just the credit card payments.

In some cases the changes are much greater than providing the 21 day notice. In some credit unions members were given the opportunity to choose their payment date in order to align loan payments with varying payroll schedules. This member choice could now be eliminated if these credit unions are forced to go to a universal payment date to comply.

One trade group made this observation in their daily update: “Since I joined NAFCU, I have never seen a compliance problem as confounding as this 21-day issue. The scope of the compliance burden is massive. The time to comply is miniscule. The availability of clear guidance is limited. This all adds up to one of the greatest compliance hurdles I’ve seen.”

Both CUNA and NAFCU are pursuing regulatory and legislative fixes for the compliance date problem (read CUNA’s statement). NAFCU has issued a call to action for individual credit unions and is encouraging them to contact their Congressional representatives: “We believe that your Representatives should hear from you on important issues that affect your daily operations. Talking with you has helped us to understand this problem. I believe that your conversations with Representatives can play the same role.”

Developments are occurring at a rapid pace. We will continue to track this issue and provide updates as necessary. We have also contacted three organizations that are assisting credit unions in implementing compliance by the August date. We will be hosting a webinar on this topic Thursday, August 6th in the afternoon. Registration will be free for Credit Unions Rising Supporters and instructions will be sent the day of the event. Others interested in attending the event, please visit the landing page here.

Complete speaker information and timing will be sent out Friday July 31st.