MADISON, Wis. — Credit unions across the country are scrambling to comply with the open-ended lending segment of the CARD Act that goes into effect on Aug. 20.
Several sources and CU CEOs indicated they are not prepared to be in full compliance, and both CU trade groups were lobbying for extensions as Credit Union Journal was going to press. The rule requires financial institutions to notify consumers what they owe on open-end products 21 days before the bill is due. If an institution fails to send this notice, the account cannot be considered late.
CUNA CEO Dan Mica called on the Federal Reserve to to delay compliance with the rule, citing "horrendous problems" CUs are having in their good faith efforts to abide by the law. "Credit unions differ from other financial institutions in that they often provide their members with consolidated statements that combine information about all savings, checking, and loan accounts that the member has with the credit union," Mica wrote in a letter. "To comply with the 21-day rule, credit unions, including those with multi-featured plans ... will be required to dismantle consolidated statement systems and other procedures, which have been in place for decades, in order to provide separate statements for each account."
Among those affected is MassMutual FCU, which was forced to change the due date for all lines of credit from the 20th day of each month to the 28th. VP-Lending Lynn A. Liquornik said the Springfield, Mass.-based CU will include the bills for those products as well as other lending products, such as auto loans, on the monthly statements that will go out to members within the first four days of every month. The only members who will really see a change, she pointed out, are those that pay in cash right on the due date.
"Anyone with an automatic payment - nothing is going to change for them," Liquornik said. "Same for the people who write their checks because this gives them an extra five to seven days. Most people will continue to send their checks when they normally send their checks."
Despite the headaches, the $163-million institution has been able to make the necessary adjustments in time, but Liquornik said other credit unions are not so fortunate.
"Unfortunately this is difficult to comply in the time we have," she said. "We're lucky that our processor already has the ability to put this on the statements."
This provision of the CARD Act could have the ironic effect of making members lives more difficult despite its intention to protect them, Mica noted in his letter to the Fed. "Members often choose biweekly payments and designate the due dates for their payments, often to coincide with when they receive payroll deposits, all of which will need to be changed in order to comply with these provisions," he said.
CUNA is calling on the Fed to allow CUs to continue to use consolidated statements that show the dates and amounts of all payments due that current month as well as the next month to comply with the 21-day notification period while causing minimal disruption to the institutions' operations. As of press time the Fed had yet to reply to Mica's letter.