MLA and the MAPR for Credit Cards – The Tedious Task of Researching Call Reports and Card Agreements
We have blogged a couple of times recently on the Military Lending Act and credit card fees. As the MLA credit card compliance deadline is less than six months away, we receive questions on how to calculate the safe harbor for some fees that can be excluded for the Military Annual Percentage Rate on these accounts. I decided to walk through the initial stages of the process the Department of Defense described in its 2015 rule – finding financial institutions with over $3 billion in outstanding credit card debt then looking at the CFPB's credit card agreement database to compare fees. The process felt like this:
Pulling call reports from NCUA and the FDIC, and then finding the corresponding publicly available credit card agreements is a bit dull and at times frustrating, but was also a helpful exercise. While this blog is not designed to calculate safe harbor fees, it may be a jumping off point for research on this issue.
The top 10 card issuers hold over 90% of all credit card debt – approximately $701 billion out of $779 billion. The largest card issuers include financial institutions that are probably not surprising – JPMorgan Chase, Bank of America, Citigroup, U.S. Bank, American Express, Discover, and Capital One. Of course, these institutions are not the only ones with over $3 billion in outstanding credit card debts, and may not be the right or best institutions for comparing your credit union's card fees for the purposes of generating a five institution average for the bona fide & reasonable fee safe harbor. However, only one credit union has over $3 billion in outstanding cards, so comparing to just other credit unions is not an option. Meanwhile, with so much concentration in this market, even some fairly large banks do not have $3 billion in outstanding credit card accounts. I went through over a dozen of call reports to pull together some financial institutions with over $3 billion in outstanding cards and then pulled a sample credit card agreement to aggregate some fee examples:
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Financial Institution with over $3 billion in outstanding in credit card debts |
Location of credit card account agreements |
Balance Transfer Fee |
Cash Advance Fee |
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Navy FCU(approximately $12.5 billion outstanding) |
None if performed at the FCU's branch or ATM; $0.50 for domestic transactions or $1.00 for overseas transactions |
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US Bank(approximately $69.3 billion outstanding) |
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Either $5 to $10 or 3% to 4% of the Transfer or Advance amount, whichever is greater |
For convenience checks: Either $5 to $10 or 3% to 4% of the Advance amount, whichever is greater |
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In branch or ATM Fee: Either $5 to $10 or 3% to 5% of the Advance amount, whichever is greater |
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Capital One(approximately $68 billion outstanding) |
Not available |
The greater of either $10 or 3% of the amount of each cash advance |
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Chase Bank(approximately $93.4 billion outstanding) |
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Either $5 or 5% of the amount of each transfer, whichever is greater |
Either $10 or 5% of the amount of each transaction, whichever is greater |
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Barclays Bank DE(approximately $23.6 billion outstanding) |
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Either $10 or 3% to 4% of the amount of each transfer, whichever is greater |
Either $10 or 3% to 5% of the amount of each cash advance, whichever is greater |
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Discover Bank(approximately $59.6 billion outstanding) |
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3% of the amount of each transfer |
Either $10 or 5% of the amount of each cash advance, whichever is greater |
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American Express Bank, FSB(approximately $12.2 billion outstanding) |
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Either $5 or 3% of the amount of each transfer, whichever is greater |
Either $5 or 3% of the amount of each transfer, whichever is greater |
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PNC Bank(approximately $4.4 billion outstanding) |
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The greater of $5; or ranging from 3% to 4% of the amount of the balance transfer |
4% of the amount of each cash advance or $10, whichever is greater |
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**Based on March 31, 2017 Call Report Data. For FDIC insured institutions, Call Reports can be searched by institution name. Credit card agreements can also be searched by institution name on the CFPB's website.
The various agreements that are publicly available vary in terms of specificity, and many list other fees such as annual membership fees, foreign transaction fees, late fees, returned payment fees, and over the limit fees. Some agreements post ranges and some fees are in percentages while others are flat fees.
Overall, this chart is only intended to provide some examples rather than serve as a large representation of products and financial institutions for generating an average fee for MLA safe harbor purposes. This sampling is a tool that may serve as a starting point. The DoD ultimately described the safe harbor for bona fide and reasonable fees as a "flexibly adaptable standard" meaning a credit union may "select any group of 5 or more credit card issuers who each have the qualifying amount of credit card loans in order to make a determination." (Emphasis added.)
This allows credit unions to take different approaches for this process which may include relying on a "commercially compiled" resource that may be available elsewhere. When looking for five card issuers' fees to average and generate a safe harbor for MLA purposes, it could make sense to find card products or fees that seem similar to yours. Other credit unions may decide to compare fees to other financial institutions operating in their region. Some may choose to find products with fees that align with the fees the credit union is charging although that could be difficult or time consuming given the number of products on the market. Ultimately, to have a safe harbor for excluding an eligible fee from the MAPR for a credit card account, the rule requires using the average fee charged by five or more creditors with at least $3 billion in outstanding credit card balances at any time during a three year lookback.
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Upcoming Webinars - In one of two webinars coming up next week, the regulatory compliance team will provide an update on the latest from NCUA, CFPB and other key regulators. NAFCU's other webcast will review NCUA's commercial lending rule:
Thursday, May 18 | 2:00 p.m. – 3:30 p.m. EST
NCUA MBL/Commercial Loan Rules – The Good, the Bad and the Ugly
Wednesday, May 17 | 2:00 p.m. – 3:30 p.m. EST
About the Author
Brandy Bruyere, NCCO, Vice President of Regulatory Compliance/Senior Counsel, NAFCU
Brandy Bruyere, NCCO was named vice president of regulatory compliance in February 2017. In her role, Bruyere oversees NAFCU's regulatory compliance team who help credit unions with a variety of compliance issues.