Credit unions are making the most of the "opportunity of a lifetime" to effect change to Regulation Z, better known as Truth in Lending.
"This is a real opportunity for not just credit unions but all lenders to achieve meaningful changes to Truth In Lending," said CUNA Associate General Counsel Mary Dunn. Indeed, it's the first time in approximately 20 years that such an opportunity has existed, CUNA's Pat Keefe added.
Both CUNA and NAFCU have submitted comment letters in response to the Federal Reserve Board's detailed request for comments, which listed some 20 questions for commentaries to address.
Rather than address every single question, NAFCU focused on the general concept of making the TIL disclosures more useful by presenting them in a more understandable way.
"We need to put consumer credit scores and credit reports in a way that regular folks like me can understand," noted NAFCU Spokesperson Rebecca Somers.
Of particular concern, NAFCU suggested, is a Fed finding that disclosures are easy to obtain, but not necessarily easy to understand.
"NAFCU has heard concerns from member credit unions that consumers are not reading the disclosures that are provided to them," the trade group wrote in its three-page comment letter. "Thus, NAFCU believes that the board should address the regulatory burden involved with providing disclosures to consumers that are not being utilized."
Indeed, NAFCU advised that it's not so much the format that needs to be changed-though providing additional flexibility for lending institutions with regard to such things as tables of content and other formatting options would be helpful-so much as it is that the actual content needs to be streamlined.
CUNA's 27-page comment letter addressed point by point each of the questions the Fed posed in its request for comments. "This was a tremendous undertaking," Dunn said, noting this is probably the longest comment letter the trade group has ever put together.
"We'd like to try to have the rules simplified so that it's easier for consumers to understand these disclosures and less burdensome for credit unions," said CUNA Senior Assistant General Counsel Jeff Bloch.
Among CUNA's Suggestions:
* Include a "Schumer Box" type of disclosure within the initial account-opening disclosures that is similar to those used for credit card solicitations and applications.
* Eliminate the use of the annual percentage rate (APR) on periodic statements, which includes other costs and fees as well as the basic interest rate. Instead, CUNA suggested posting the interest rate with a separate disclosure for any additional costs and fees.
* Use consistent terminology for "fee" instead of a hodgepodge of terms. Currently, in addition to the term "fee" phrases such as "finance charge," "other charge" or "cost of credit" are all used. Streamlined, consistent vocabulary will make it easier for consumers.
* For smaller credit unions, complying with Reg Z is particularly difficult because they don't have sufficient compliance staff and often must rely on outside counsel, and penalties are tougher for a small CU to absorb. The Fed should consider reducing penalties for those smaller institutions that inadvertently violate Reg Z, and any such penalties could be determined on a sliding scale, based on the size of the institution.
Both CUNA and NAFCU said they approved of making changes to Reg Z in stages rather than all at once and called for plenty of lead time between any changes made to the reg and actual implementation of the changes so credit unions will have time to make the necessary compliance changes.
