Credit Unions and the Credit Card Act of 2009
The Credit Card Accountability, Responsibility and Disclosure Act of 2009, which was signed recently, places much emphasis on the business practices of bank card issuers, but it also pertains to credit unions. Credit unions will need to rely on their card processors to be in compliance with the new law.
Examples of issues that card processors will have to be on top of include making sure that cardholder statements display the multiple disclosures which are mandated by law and making sure that cardholders’ payments are properly applied. Issuers also must make sure statements disclose how long it would take to pay off the existing balance, including a breakdown of the total interest cost, if the consumer pays only the minimum balance each month. Also required is a detailing of what it would cost, and what the payment amounts would be, if the existing balance was paid off in 3 years.
“Barbara Hunter, VP of card services with Fidelity National Information Services, explained that FIS is already gearing up to make many of the changes required by law because federal regulations had already mandated them. Hunter along with Rachel Templen, an FIS executive serving as project manager in the compliance efforts, divided the processor’s efforts into the changes that FIS will have to make to its processing platform to accommodate the law and the compliance tasks that credit unions will have to address, such as making sure they have a web site which includes a disclosure statement.
Mark Fenner, national sales manager for TNB Card Services, and Mitch Dawes, an account executive with TNB, stressed that TNB has been proactively making the changes required by law and that was working diligently to make sure its credit unions understood the changes.
Some card processors have indicated that a few of their credit unions may need to shorten July’s credit card billing cycle in order to properly comply with new grace period requirements. “Working back from the due date, we have to calculate when the billing cycle will have to close to allow us to get the accounts processed and statements printed and mailed,” said Steve Salzer, chief strategic, compliance and legal officer for PSCU Financial Services.
Salzer offered up an example of an issue the processor was working through, “With the law’s new requirements about how often credit card interest rates can be changed, what are the appropriate credit scores and other parameters that need to be in place to make credit line increases?”
Credit unions will need evaluate their prospective card marketing plans thanks to the new law. Credit unions will want to consider how low of an introductory interest rate they might want to offer and the amount of the balance limit.
