Compliance Blog

Posted by Anthony Demangone

Section 305 of the Credit CARD Act shouldn't affect too many credit unions.  This section underscores one of the main themes of the Credit CARD Act: stay away form young consumers.  It take effect on February 22, 2010.

This section amends Section 127 of the Truth in Lending Act to limit the ability of card issuers to issue "affinity" cards under an agreement between the issuer and an institution of higher learning. The definition of college affinity card would not appear to cover a credit union that serves an institution of higher learning. That being said, the more a card contains symbols, mascots, pictures, or emblems that identify more with the institution than the credit union, compliance risk may increase. If your credit union serves an institution of higher learning, this section should be reviewed closely.

The section also requires creditors to submit an annual report to the Federal Reserve detailing all terms and conditions of all business marketing and promotional agreements and college affinity card agreements with an institution of higher learning, an alumni association, or foundation affiliated with the school.

Again, if your credit union serves an institution of higher learning and has a credit card that bears the school's emblem, mascot, etc., read this section closely.  The key is to review the definition of "college affinity card" to see if your card falls within it.  Here's a link to the NAFCU Compliance page, where you can find a link to the Credit CARD Act.

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Here's a good tidbit that we pulled from the Federal Reserve's final rule that implements the Credit CARD Act's provisions that take effect August 20, 2009.

The 21-day timing  requirement that affects periodic statements sent for open-end loans does not kick in until August 20, 2009.  So it would not apply for statements mailed August 19, 2009 or sooner.   Here's what the Fed had to say:   

"That is, the relevant date for purposes of determining when a creditor must comply with revised § 226.5(b)(2)(ii) is the date on which the periodic statement is mailed or delivered, not the due date or grace period expiration date reflected on the statement. Thus, if a periodic statement is mailed or delivered on August 20, the creditor must have reasonable procedures designed to ensure that the payment due date and the grace period expiration date are not earlier than September 10. However, if a periodic statement is mailed or delivered on August 19, this new requirement does not apply to that statement.

The Board believes that this is the appropriate reading of the 90-day implementation period in the Credit Card Act. Although the Credit Card Act could be construed to require creditors to have reasonable procedures designed to ensure that periodic statements are mailed or delivered at least 21 days before any payment due date or grace period expiration date that falls on or after August 20, this reading would create uncertainty regarding compliance with the amendments to TILA Section 163 by requiring creditors to mail or deliver periodic statements in accordance with revised TILA Section 163 and § 226.5(b)(2)(ii) prior to the effective date for those provisions. Accordingly, for clarity and consistency, the Board believes the better reading of the Credit Card Act is that creditors must begin to comply with amended TILA Section 163 (as implemented in amended § 226.5(b)(2)(ii)) with respect to periodic statements mailed or delivered on or after August 20, 2009. " (Emphasis added.)  P. 20, Interim Final Rule amending Regulation Z, as currently published by the Federal Reserve.)

So, the 21-day requirement will take effect for most institutions with their September 2009 statements.