DES MOINES, Iowa – As a result of passage of the CARD Act and its Aug. 22 compliance date, 95% of credit unions that issue cards in conjunction with TMG here have discontinued the authorization of overlimit credit card transactions, the company is reporting.
Those clients continuing to allow overlimit authorizations will do so without assessing a fee, TMG said.
“There’s no doubt some cardholders will miss the ability to spend over their credit limits,” said Sara Petty, TMG’s vice president of strategic initiatives. “However, removing the temptation to overspend really makes sense for credit unions as they lead the country’s efforts to return to thrift and financial responsibility.”
The new law will present several challenges in the maintenance of two cardholder groups, those opting-in and those opting-out of overlimit fees, according to TMG, which is an affiliate of the Iowa Credit Union League. “To complicate matters, the two groups would be in constant flux, as cardholders maintain the ability to change their minds,” said Petty. “If, for instance, a cardholder has opted in, he has the right to opt-out each time he receives a statement containing an overlimit fee.”
In addition to managing transactions for and communication with two cardholder groups, credit unions offering fee-based overlimit services have been asked to present their fee models to the Federal Reserve Board in order to weigh in on the Fed’s final rules regarding the reasonability of fees, a requirement TMG said will be “insurmountable” for many card-issuing credit unions.
