Compliance Blog

Posted by Sarah Loats

In my haste to put up a blog posting for last Friday, I left out the good news. I threw in a last second sentence about the House Financial Services approving a bill to move the deadline for the Credit CARD Act to December 1st, failing to mention that it would exempt from this earlier deadline card issuers with less than 2 million credit card accounts. Here's NAFCU's news story about this. That'll teach me to post something in a hurry. Maybe.

***

You may remember that the UDAP rule contained requirements regarding the allocation of payments in excess of the minimum payment. The Credit CARD Act rule contains a similar, but stronger rule. When different rates apply to different balances on a card, Regulation Z will require that any payment amount in excess of the minimum payment be allocated to the balance with the highest APR.

There are a few items of note:

• This rule does not regulate how the minimum payment must be applied.

• If a credit card account has a balance subject to a deferred interest rate program, that balance should be treated as having a 0% APR during the deferral period for payment allocation purposes.

• There's a wrinkle to this deferred interest rule. The proposed rule requires that the credit union must allocate any payments in excess of the minimum payment first to that deferred interest balance for the two billing cycles immediately preceding expiration of the deferred interest period.

Confused yet? The proposed staff commentary includes some good examples explaining this rule.