Compliance Blog

Posted by Anthony Demangone

Yesterday, Reps. Barney Frank (D-MA) and Carolyn Maloney (D-NY) introduced legislation that would move up the compliance deadline for the remaining provisions of the Credit CARD Act to December 1, 2009.

Read the Financial Services Committee press release here.
Download the legislation here.
Here's a link to the original Credit CARD Act.

The legislation is deceptively short.  It basically says this: Anything that was effective 9 months after the Credit CARD Act was enacted is now effective December 1, 2009.  And it added additional provisions to move up the effective dates concerning gift cards, reasonable fees and the "look-back provision" concerning increased APRs to December 1, 2009 as well.

OK, you can pick up your jaw now.  Before we hit the panic button, this legislation must pass numerous hurdles before it could become law.  NAFCU's lobbyists are actively communicating with all the necessary parties to let them know the enormous compliance burdens this would cause.  Not to mention the fact that it would pretty much ruin my birthday and Thanksgiving, which fall on the same day this year.

Personally, I see this as Reps. Frank and Maloney voicing their displeasure (loudly) with the financial institution industry.  This comes from the press release.

“Pew Charitable Trust reports that interest rates have spiked by an average of 20% on credit cards representing more than 91% of the $864 billion in outstanding credit card balances. It’s clear that credit card companies are taking advantage of this period between the signing of my bill and the current effective date,” Rep. Maloney said. “The breadth and depth of the rate hikes happening now point to the need for faster consumer protections. Americans need relief now.”

Stay tuned, but don't panic yet.

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Let's move on to our RESPA overview.  Let's continue with the GFE requirements, shall we?

Section 3500.7(c).

GFE Expiration. A credit union's estimates of the charges and terms on the GFE must be available for at least 10 business days.  But you can extend that time period if you wish.  This requirement does not apply to everything, thank goodness.  It doesn't apply to the interest rate, charges and terms related to the interest rate, and per diem interest.

It could have been worse.  Consumer groups wanted 30 days.

I again underscore the fact that the 10-day period doesn't apply to interest rates.  If you don't believe me, here's HUD's take on this issue from the preamble to the final rule:

Accordingly, the final rule provides that the interest rate stated on the GFE will be available until a date set by the loan originator for the loan. HUD is not requiring the interest rate to be available for any specific length of time.The final rule provides that the loan originator indicate on the GFE the period during which the interest rate is available. After that time period, the interest rate, the interest rate related charges, and loan terms, including some of the loan originator charges, the per diem interest, and the monthly payment estimate for the loan could change until the interest rate is locked.  (Emphasis added.) 73 Fed. Reg. 68,216.

There was only one question and answer on HUD's FAQ document that addressed this:

Q: When does a GFE expire?

A: If a borrower does not express an intent to continue with an application within ten business days after the GFE is provided (or such longer time period specified by the loan originator), the loan originator is no longer bound by the GFE.

Section 3500.7(d).

This section gets to content and form of the GFE.  Rather than go through all f that here, I think you'd be best served to review this post, where I highlight the fact that Appendix C of the final rule will answer most questions concerning how to complete the GFE.

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Have a great weekend, everyone.  Even you Hawkeye fans.