Recent Regulatory Comment Calls

CUNA
August 4, 2009 | COMMENTS

Fed Requests Comments on Regulation Z Rules Implementing the New Credit Card Law

The Federal Reserve Board (Fed) has issued an interim final rule amending Regulation Z, the Truth in Lending Act (TILA), that will require creditors to adopt reasonable policies and procedures to ensure that periodic statements for any open-end consumer credit account are mailed or delivered at least 21 days before the payment is due in order to be able to charge a late fee or to otherwise consider the payment as late. The rule will also require creditors to provide a 45-day notice of a change in the interest rate or other significant changes to the terms of the credit card agreement. These provisions will also allow consumers to reject these changes if they inform the creditor before they go into effect.

This rule is the first stage in the implementation of the Credit Card Accountability, Responsibility and Disclosures Act of 2009 (CARD Act), which amended TILA to establish fair practices for credit cards and other open-end credit plans. This rule implements those provisions of the CARD Act that will go into effect on August 20, 2009. The Fed will issue additional rules to implement the provisions that go into effect on February 22 and August 22, 2010.

The provisions in the CARD Act with regard to delivering periodic statements at least 21 days before the due date apply to all open-end credit, in addition to credit cards. The provisions with regard to providing a 45-day notice for change in terms will only apply to credit cards.

CUNA has been in contact with the Fed and other key policymakers over the past several weeks to resolve the very difficult compliance challenges associated with providing periodic statements at least 21 days before the payment is due. The interim final rule provides very limited relief by indicating in the supplementary information that "for a short period of time after August 20," periodic statements for open-end credit other than credit cards may disclose due dates that are inconsistent with the 21-day requirement, as long as there is a prominent disclosure either on or with the statement that the payment will not be treated as late if received within 21 days after the statement is mailed. CUNA will continue to work with the Fed and other key policymakers to ensure that the final version of this rule provides additional flexibility.

The interim final rule is effective as of August 20, 2009. Comments are due to the Fed by September 21, 2009 and are due to CUNA by September 9, 2009. If commenting directly to the Fed, you must refer to Docket No. R-1364.

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.com and to Senior Assistant General Counsel Jeff Bloch at jbloch@cuna.com; or mail them to Mary and Jeff in c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, 6th Floor, Washington, DC 20004. You may also contact us if you would like a copy of the interim final rule or you may access it on the Internet  here.

> Click Here for the Full Comment Call w/Background & Questions to Consider

 

Proposed Rules for Student Loans

The Department of Education has proposed amendments to the Federal Perkins Loan (Perkins Loan) Program, Federal Family Education Loan (FFEL) Program, and the William D. Ford Federal Direct Loan (Direct Loan) Program. These revisions are proposed in order to enact statutory provisions of the Higher Education Act of 1965 (HEA) as amended by the Higher Education Opportunity Act of 2008 (HEOA).

Here are the significant provisions of the proposed rule:

The proposed rules amend the definition of a "total and permanent disability" as the condition of an individual who is unable to engage in any substantial or gainful activity by reason of a physical or mental impairment, or a veteran who has been determined to be unemployable due to a service-related disability. The changes also include a proposed definition of "substantial gainful activity" to include a level of work performed for pay or profit that involves doing significant physical or mental activities, or both.

The proposed rules create two separate categories for loan discharges. The first is for veterans who have been determined to be unemployable due to a service related injury and the second is for individuals who have been diagnosed with a physical or mental disability which prevents substantial gainful employment.

The proposal also provides several different ways for borrowers to defer PLUS loans for six months after the loans have been made.

The proposal includes a provision made pursuant to the HEOA act that while an active-duty military personnel is deployed, he or she may only be charged a maximum of six percent interest on his or her FFEL or Direct loans.

The proposed rules would require a lender who grants deferment to a borrower with an unsubsidized Stafford Loan to provide the borrower with information concerning the capitalization of interest on the loan principal and the total amount of interest to be paid during the life of the loan. Further, when a borrower requests a deferral and is responsible for interest during the deferment period, the lender is required to notify the borrower that he has the option to pay the interest during the deferral or may cancel the deferment and continue paying the loan. The information given to the borrower must include an example of the impact on the borrower's loan capitalization of accrued unpaid interest and on the total amount of interest to be paid over the life of the loan.

The proposal specifies that the annual amount due on a borrower's loans for determining whether the borrower suffers from a partial financial hardship is either the annual amount due on a standard 10-year payment plan or the annual amount due under a 10-year plan when the borrower opts for an Income Based Repayment option; whichever is greater. If a couple file joint tax returns, each borrower's share of the calculated financial hardship would be adjusted by multiplying the borrower's payment by his percentage of the total loan debt.

The proposal would allow a borrower who would ordinarily meet the requirements for teacher loan forgiveness to receive forgiveness based on teaching service performed at one or more locations of an eligible educational service agency that serves low income families.

The proposed rules would provide that a borrower may not again rehabilitate a loan that enters default for any loan previously rehabilitated on or after August 14, 2008.

The proposal would forbid a number of lender and guaranty inducements, including: providing processing, referral or finder's fees; providing payments to institutions or their employees and to any other party, including schools and their employees. Lenders and guaranty agencies are further prohibited from providing staffing services to schools under any condition.

The proposed rules include a number of disclosure requirements. With regard to unsubsidized loans, the disclosures must include: an explanation that the borrower may pay accruing interest while in school and, if the interest is not paid, when and how often it will be capitalized; for parent PLUS borrowers, an explanation that the payment may be deferred while the student on whose behalf the parent borrowed is in school as well as, if the interest is capitalized, when and how often it will be capitalized; information on forbearances; and a description of loan forgiveness options and the requirements to receive forgiveness.

The proposal also stipulates that a lender must disclose to a borrower: information on any special loan repayment benefits available, the requirements to maintain the benefit, and the impact on the borrower's overall repayment; and any limitations associated with the benefit and the circumstances that would cause the borrower to lose the benefit, as well as how the borrower may be able to regain the benefit. The lender must also provide a borrower with the list of repayment plans available and remind the borrower that he or she may change plans at least once a year. The borrower must be informed about how to avoid default and, if the borrower is in default, how to get out of default. The lender must also provide the borrower with information about additional resources available to assist in loan repayment, including nonprofit organizations, advocates and counselors, and the Department's Ombudsman.

The proposal also requires lenders to provide specific repayment information to the borrower with a bill or statement that corresponds to each payment installment time period in which a payment is due. That information must include: the original principal amount of the borrower's loan; the current balance as of the time of the bill or statement; the interest rate on the loan; the interest paid by the borrower since the last statement or bill; aggregate totals paid; and a description of each fee the borrower has been charged for the most recent period. The borrower must be told the date by which payments must be made to avoid additional fees and the amount of that payment and the fees. Finally, the lender must remind the borrower of the option to change repayment plans and what plans are available with a link to the Department's Web site for that repayment plan information.

The proposal adds a new section of required disclosures for borrowers who contact the lender and inform the lender that they are having difficulty making their required payments. Lenders must inform these borrowers of the repayment plans available, the requirements for forbearance and the options available to avoid default, as well as any fees or costs associated with those options.

The proposal adds a new section on the required disclosures for borrowers who are 60-days delinquent on repayment of their loans. Lenders must provide these borrowers with information regarding the date on which the loan will default if no payment is made, the minimum payment to avoid default, and the payment amount that would bring the loan to a current status or pay the loan in full. Lenders must inform borrowers about the options for avoiding default, including deferments and forbearance, any costs associated with those options, and any opportunity for loan discharge the borrower may have. The notice must be sent to the borrower within five days of the borrower becoming 60-days delinquent, unless the lender has sent the notice within the previous 120 days.

The proposed rules create new requirements that a borrower be notified when his loan is assigned, transferred or sold to a new lender to whom the buyer must make payments. The borrower must now be notified of the effective date of the assignment or transfer of the loan, the date that the current loan servicer will stop accepting the borrower's payments, and the date the new loan servicer will begin accepting those payments.

The proposal includes revised requirements for lenders when borrowers enter forbearance. The lender is required to give the borrower information concerning the impact of capitalization of interest on the loan and the total amount to be repaid over the life of the loan. Further, the lender is required to contact the borrower at least once every 180 days that the loan is in forbearance, and provide information on the impact on the interest that will be capitalized while the loan is in forbearance.

Comments on the following proposed changes are due by August 24, 2009. Please submit your comments to CUNA by August 17, 2009 .

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.com and to Senior Assistant General Counsel Jeff Bloch at jbloch@cuna.com ; or mail them to Mary and Jeff in c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, 6th Floor, Washington, DC 20004. You may also contact us if you would like a copy of the proposed rule or you may access it on the Internet here.

> Click Here for the Full Comment Call w/Background & Questions to Consider

 

NCUSIF Premium and One Percent Deposit

The National Credit Union Administration (NCUA) has issued a proposed rule to clarify how credit unions that enter or depart the National Credit Union Share Insurance Fund (NCUSIF) system during the calendar year are affected by premium or deposit replenishment assessments.

The proposal is intended to supplement NCUA's regulations related to the NCUSIF; many of the proposed provisions address specific issues for which no current regulations exist.

The proposed rule was issued as a result of the unprecedented level of NCUSIF expenses thus far in 2009.

Comments are due to NCUA by August 24, 2009; please submit your comments to CUNA by August 17.

Please feel free to e-mail your responses to Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.coop and to Regulatory Counsel Luke Martone at lmartone@cuna.coop. You may also contact us at 800-356-9655, ext. 6743, if you have questions. Click here to access the proposed rule.

> Click Here for the Full Comment Call w/Background & Questions to Consider