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					                Regulation Z




Presented By:
Robert Rutkowski, Esq.
        What Most People
        Think of Regulation Z (Reg. Z)




2   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
        What Happens When You Violate Reg. Z




3   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Regulation Z Overview
        Reg. Z

        • Implementation statute for Consumer Credit Protection
          Act of which Truth-in-Lending Act (TILA) is part
        • TILA revised in 1980
        • Revised through recent Bankruptcy code amendments
        • Final rules in late 2008 and early 2009 are the most
          significant changes to Reg Z since its inception
        • The Credit CARD Act creates chaos in the summer of ‘09




5   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
        Reg. Z Purpose

        • Provides consumers with meaningful information about
          cost of credit they are seeking
        • Regulates advertising of consumer credit terms which
          must comply with specific requirements
        • Designed to resolve credit billing disputes and prescribe
          methods of certain billing and credit card practices




6   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
        Reg. Z Coverage

        • Applies to each individual or business that offers or
          extends credit when the following four conditions are
          met:
              – Credit offered or extended to consumers
              – Offering or extending of credit is done regularly
              – Credit subject to finance charge or payable by written agreement
                in more than four installments
              – Credit primarily for personal, family or household purposes




7   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
        Reg. Z Coverage

        • If credit card is involved, certain provisions apply even if
          type of credit does not meet all four conditions

        • If it is a business loan, Reg. Z does not apply

        • If there is doubt, just make disclosure




8   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
        Reg. Z In Basic Terms

        • The focus of Reg. Z is to provide consumers with
          information on finance charges which in the most basic
          terms is the cost to the consumer of borrowing money




9   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Reg. Z: Regulatory Bodies

         • Federal and federally insured Credit Unions: NCUA

         • State chartered, privately insured Credit Unions: FTC
           and State Attorney General

         • Regulators can assess penalties and require compliance




10   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Civil Penalties in Individual Actions

         • Actual damages: twice the amount of any finance charge
           in connection with the credit transaction

         • In the case of a consumer lease, 25% of the total
           monthly payments under the lease

         • Minimum of $100, maximum $1,000




11   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Civil Penalties in Individual Actions

         • Also may be liable for increased damages in individual
           actions relating to closed-end credit secured by real
           property or dwelling- a minimum of $200 and a maximum
           of $2,000;

         • Rescission, costs, attorneys fees; or

         • All finance charges and fees paid by consumer




12   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Civil Penalties in Class Actions

         • Actual damages;

         • Less of $500,000 or 1% of the net worth of the creditor;
           and

         • Rescission, costs and attorneys fees




13   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Criminal Penalties for Willful and Knowing
     Violations
         • Up to $5,000 in fines and a year in prison




14   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Focus On Finance Charges
     Reg. Z’s Focus on Finance Charges

         • Under Reg. Z a finance charge is the cost of consumer
           credit as a dollar amount and includes:
               – Any charge payable directly or indirectly by the consumer and
                 imposed directly or indirectly by the creditor as an incident to or as
                 a condition of the extension of credit
               – It does not include any charge of a type payable in a comparable
                 cash transaction




16   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Reg. Z’s Focus on Finance Charges

         • If the cash customer would not pay the charge or if the
           charge would be waived by the lender in a cash deal,
           that type of charge must be included in the annual
           percentage rate (APR) as a cost of credit to the “loan”
           customer




17   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Common Finance Charges

         • Interest or time price differential (think of a furniture loan
           that will only cost $5,000 if paid within a year but $6,500
           if paid in a year and a day)




18   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Common Finance Charges

         • Service transaction activity and carrying charges
           including any charge imposed on a checking or other
           transaction account to the extent that the charge
           exceeds the charge for similar account without a credit
           feature (think of a revolving credit line with a checking
           account feature)




19   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Common Finance Charges

         • Points, loan fees, assumption fees, finder fees and
           similar charges

         • Appraisal investigation and credit report fees

         • Premiums or other charges for any guarantee or
           insurance protecting the creditor against the consumers
           default or other credit loss




20   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Common Finance Charges

         • Charges imposed on a creditor by another person for
           purchasing or accepting a consumers obligation if the
           consumer is required to pay the charges in cash in
           addition to the obligation or has a deduction from the
           proceeds of the obligation (Think of 1-3% assignment
           fee paid to a dealer. If the cost is paid by the credit
           union, do not include in APR even if the customer would
           be charged a higher interest rate than a direct loan. But
           if the assignment fee is paid by the customer, it is part of
           APR.)




21   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Common Finance Charges

         • Premiums or other charges for credit life, accident health
           or loss of income insurance written in connection with a
           credit transaction if the customer is required to pay the
           same in order to get the loan




22   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Common Finance Charges

         • Premiums or other charges for insurance against loss or
           damage to property or against liability arising out of the
           ownership or use of property written in connection with a
           credit transaction (force placed insurance)




23   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Common Finance Charges

         • Charges or premiums paid for debt cancellation
           coverage written in connection with a credit transaction
           whether or not the coverage is insurance under
           applicable law




24   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Exceptions to These Rules

         • Application fees

         • Charges for unanticipated late payment, exceeding a
           credit limit, or for delinquency, default, or a similar
           occurrence

         • Charges for paying items on an overdrawn account
           unless previously agreed to in writing




25   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Exceptions to These Rules (Mortgages)

         • The following fees in a transaction secured by real
           property or any residential mortgage transaction, if the
           fees are bona fide and reasonable in amount

               – Seller’s points

               – Property appraisal fees




26   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Exceptions to These Rules (Mortgages)

              – Fees for title examination, abstract of title, title insurance, property
                survey and similar purposes

              – Fees for preparing deeds, mortgages and reconveyance
                settlement and similar documents

              – Notary and credit report fees




27   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Exceptions to These Rules

         • In basic terms, if the coverage is required it is part of
           APR; if optional it is not part of APR

         • Premiums for credit life, accident health or loss of income
           insurance and net amounts paid for debt cancellation
           insurance may be excluded from the finance charge if:
               – The fee coverage is not required by the creditor
               – The premium or fee for the initial term of coverage is disclosed
               – The consumer signs or initials in the affirmative request for the
                 coverage after receiving the above disclosures




28   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Open-End Credit Disclosures
     Open-End Credit Disclosures

         • Creditors are required to make all disclosures clearly and
           conspicuously, in writing, and in a form consumer may
           keep




30   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Initial Disclosure Statements

         • Must be furnished to the member before the first
           transaction

         • Creditor must send a periodic statement for each billing
           cycle where an account has a balance of more than
           $1.00 on which a finance charge has been imposed

         • New rule: statement must be sent 21 days prior to due
           date




31   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Initial Disclosure Statements

         • Need not be sent if:

               – Creditor deems it uncollectable

               – Delinquency collection proceedings have been instituted

               – Furnishing the statement would violate federal law (think of
                 Bankruptcy)




32   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Open-end Consumer Credit Disclosures

         • Must reflect the terms of the legal obligations between
           the parties




33   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Credit Card Disclosures: Applications
          and Solicitations
     Credit Card Disclosures, Applications and
     Solicitations
         • Direct mail
               – Truth-in-Lending Section 127(c)(1)(A) requires certain items to be
                 disclosed
                   • Each annual percentage rate
                   • Any annual, periodic or membership fee
                   • Any minimum finance charge
                   • Any transaction charge
                   • The grace period
                   • The name of the balance calculation method




35   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Credit Card Disclosures, Applications and
     Solicitations
                      • Any cash advance fee
                      • Any fee imposed for a late payment
                      • Any fee imposed in connection with an extension of credit in
                        excess of the amount of credit authorized




36   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Credit Card Costs and Items to Be Disclosed

         • Periodic rate

         • Introductory rates

         • Variable rate disclosure

         • Fees for issuance or availability of a card

         • Minimum finance charge



37   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Credit Card Costs and Items to Be Disclosed

         • Transaction charge for purchases

         • Grace period allowed for purchases

         • Balance computation method for purchases

         • Additional fees such as, cash advances, late payments
           or for exceeding credit limit




38   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Credit Card: Balance Computation Methods

         • Average daily balance

         • Two cycle average daily balance

         • Adjusted balance

         • Previous balance




39   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Credit Card: Tabular Format That Requires
     Headings
         •      APRs including variable rates
         •      Fees for issuance or availability of a card
         •      Minimum and transaction charges
         •      Grace periods
         •      Balance computation methods and repayments
         •      Annual fees




40   |       A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Home Equity Application Disclosures
     Home Equity Plans: Disclosures with
     Applications
         • Fixed annual percentage rate

         • Variable percentage rate

         • Other fees imposed by the creditor

         • Estimates of fees that may be imposed by third parties




42   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Disclosures with
     Applications
         • Statements of risk of loss of dwelling

         • Conditions to which disclosed terms are subject

         • Rights of creditors with respect to extensions of credit

         • Repayment options and minimum periodic payments




43   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Disclosures with
     Applications
         • Example of minimum payments and maximum
           repayment period

         • Statement concerning balloon payments

         • Limitations and minimum amount requirements and
           extension of credit




44   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Disclosures with
     Applications
         • Statement regarding consultation of tax advisor (new
           requirements)

         • Disclosure requirements established by board




45   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Disclosure Rules

         • Must be in writing and may be written on the application
           form itself which can be returned to the creditor

         • Different rules apply for the information to be provided in
           connection with home equity loans on a retainable initial
           disclosure statement




46   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Disclosure Rules

         • There are many other disclosures that are necessary and
           if creditors give a single disclosure form covering all of
           the home equity offerings, all aspects of their plans must
           be described in the first set of disclosures




47   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Timing of Disclosures

         • Must be given at the time the application is provided to
           the consumer

         • Creditor may mail the disclosures and brochure to the
           consumer within three business days of its receipt of the
           application contained in publications or by phone




48   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Other Disclosures

         • If you do not provide a retainable copy you must have a
           disclosure that advises the consumer to make a copy

         • If you do not guarantee terms then you must disclose the
           terms are subject to change

         • When member has a right to refund of fees




49   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Other Disclosures

         • Creditors must disclose the fact that a security interest is
           being taken in a consumer’s dwelling and that the
           consumer may lose his/her home in the event of default




50   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Other Disclosures

         • The statement must be included that under certain
           conditions the creditor may:
               –    Terminate the plan
               –    Accelerate any outstanding balance
               –    Prohibit additional advances
               –    Reduce the credit limit
               –    Modify the original terms




51   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Other Disclosures

         • Any fees that may be imposed if the account is
           terminated must be identified

         • Payment terms must be made clear




52   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Fees and
     Miscellaneous Disclosures
         • A recent APR must be provided for fixed rate plans and
           includes only interest

         • Creditors must describe and give the amount of charges
           they impose to open, use or maintain account




53   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Fees and
     Miscellaneous Disclosures
         • The statement of when the consumer must pay the
           charges such as application fees, points, annual fees,
           transaction fees, and fees imposed when the plan
           converts to a repayment phase

         • Fees imposed by third parties and initially paid by the
           consumer




54   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Fees and
     Miscellaneous Disclosures
         • A step fee schedule in which a fee will increase a
           specified amount at a specified date

         • Estimate of total fees imposed by third parties on the
           account stated as either a dollar amount or range
           including appraisals, credit reports and government
           agency and attorney fees




55   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Fees and
     Miscellaneous Disclosures
         • Closing costs

         • A notice that consumers may request more specific
           information about fees from the creditor




56   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Fees and
     Miscellaneous Disclosures
         • Any limitations on the number of extensions or amount of
           credit that can be obtained during any period and any
           minimum draw or minimum outstanding balance
           requirement

         • That consumers be told to consult a tax advisor if more
           information is desired (now expanded)




57   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Historical Example
     Disclosure
         • Table based on a $10,000 extension of credit

         • APR and the minimum periodic payment amount

         • Affected during the proceeding fifteen-year period

         • Changes in any index




58   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Historical Example
     Disclosure
         • Based on the most recent fifteen years of index

         • Reflect all significant HELOC plan terms

         • Affected by the index movement




59   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: TILA Restrictions

         • The creditor is forbidden to terminate an account except
               –    In case of fraud
               –    Material misrepresentation by the consumer
               –    Failure to meet repayment terms
               –    Act by member that affects security interest
               –    Federal law requires it




60   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Creditor May
     Temporarily Suspend/Reduce Credit Limit
         • When the value of the property falls significantly below
           the appraised value for purposes of the plan

         • When the creditor reasonably believes the consumer will
           be unable to fulfill the plans repayment terms

         • Members default on any material obligation of the
           agreement




61   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Creditor May
     Temporarily Suspend/Reduce Credit Limit
         • An action by governmental body that precludes the
           creditor from imposing the agreed on APR (current rate
           limit on Fed Credit Unions- 18%)

         • An action by governmental body that adversely affects
           the creditor’s security interest (think of tax liens or
           imminent domain)




62   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Creditor May
     Temporarily Suspend/Reduce Credit Limit
         • When the APR corresponding to the periodic rate
           reaches the maximum rate on the plan

         • Miscellaneous government actions




63   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Home Equity Plans: Fee Refunds

         • You have to refund all fees paid by the consumer in
           connection with an application if they rescind within the
           three-day period

         • If any disclosed term changes between the time the early
           disclosures are provided and the time the plan opens
           such that a consumer decides not to enter into the plan




64   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Variable Rate Plans

         • Reg. Z requires creditors to provide information about
           any variable rate feature contained in a plan

         • These disclosures closely parallel the disclosures
           currently required for closed-end variable rate
           transactions secured by a consumers principal dwelling




65   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
                          Zzz…
66   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Variable Rate Plans

         • A brochure is required by Reg. Z that is prepared by the
           Federal Reserve Board describing home equity plans or
           a suitable substitute




67   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Variable Rate Plans

          The index rate or rate of interest used in calculating a
           variable rate must be publicly available and not under the
           control of the creditor




68   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Conversion Type Plans

         • Some home equity loan plans provide for two periods
           during the life of the loan: an initial borrowing period
           followed by a repayment period

         • In such cases, the disclosures must include information
           about both phases of the plan




69   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Mandatory Periodic Statement
        Disclosures
     Mandatory Periodic Statement Disclosures

         •      Previous balance
         •      Identification of transactions
         •      Credits
         •      Periodic rates and perspective APRs
         •      Balance on which finance charge was computed
         •      Disclosure of any impact of credit life insurance on the
                APR




71   |       A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Mandatory Periodic Statement Disclosures

         • The amount of any finance charge imposed
         • Historical APR
         • Other charges such as late fees, over the limit charges,
           and ATM fees
         • Closing date and new balance
         • Free ride period
         • Address for notice of billing errors
         • Minimum payment warning




72   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Subsequent Disclosure Requirements

         • Statement of billing rights (no fewer than six, no more
           than 18 months per calendar year or a short form notice
           on or with each periodic statement)

         • Additional features for open-end plans




73   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Subsequent Disclosure Requirements

         • Whenever a term is required to be disclosed, the initial
           statement is changed or the required minimum periodic
           payment is increased:

               – The creditor must mail or deliver written notice of the change to
                 each consumer that will be affected at least fifteen days prior to
                 the effective date of the change




74   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Changes In Disclosures
     TILA Restrictions on Changes

         • The creditor may not unilaterally change any of the terms
           required to be disclosed on applications or indeed any
           term except a trivial term such as a billing address (You
           may change the index and margin used to calculate a
           variable rate if the old index is no longer available.)




76   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     TILA Restrictions on Changes

         • May be made by written agreement

         • Beneficial changes may be made so long as they are
           unequivocally beneficial or insignificant

         • Contractual events- changes made in writing by
           addendum

         • Index substitution- no written change needed as long as
           the substituted index is substantially similar to the old
           index

77   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     TILA Restrictions on Changes: Changes Not
     Requiring Notice
         • Late payment charges

         • Charges for documentary or over the limit charges

         • Any reduction of any component of a finance charge




78   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      TILA Restrictions on Changes: Changes Not
      Requiring Notice

     • Suspension of future credit privileges or termination of an
       account or plan (i.e. suspension due to delinquency. We
       would not want to give notice that we were going to be
       closing the account and suing because the debtor would run
       up the account, but as a practical matter the debtor will get
       notice with the first collection demand.)




79    |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     TILA Restrictions on Changes: Changes Not
     Requiring Notice
         • A change resulting from an agreement involving a court
           proceeding from the consumers default or delinquency




80   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Disclosures With Multiple Creditors or
     Consumers
         • If a transaction involves more than one creditor only one
           set of disclosures may be given

         • Creditors must agree among themselves which creditor
           will comply with the requirements and the regulation it
           imposes on any or all of them




81   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Subsequent Events Rendering Disclosures
     Inaccurate
         • If a disclosure becomes inaccurate because of an event
           that occurs after the creditor delivers the required
           disclosures, the inaccuracy is not a violation of Reg. Z
           but new disclosures may be required




82   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Closed-End Credit Disclosures
     Closed-End Consumer Credit Disclosures

         • Creditors must make the Reg. Z disclosures clearly and
           conspicuously in writing and in a form the consumer may
           keep

         • Disclosures may be grouped together and must be
           segregated from anything else and must not contain any
           information not directly related to the disclosures
           required under Reg. Z




84   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Closed-End Consumer Credit Disclosures

         • Disclosures must be segregated in a box often referred
           to as the “federal box” or by furnishing a separate
           disclosure statement




85   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Closed-End Consumer Credit Disclosures

         • Disclosures must be made before the consummation of
           the transaction




86   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Disclosure of Legally Binding Terms and
     Use of Estimates
         • Requirement to reflect legal obligation

         • Impact of buy-downs

         • Impact of wrap-around financing




87   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Disclosure of Legally Binding Terms and
     Use of Estimates
         • Disclosures of employees’ preferred rate plans

         • The use of estimates




88   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Disclosure of Legally Binding Terms and
     Use of Estimates
         • Rules for demand obligations

         • Rules for advances, underline of credit and construction
           of permanent loan plans

         • Reverse mortgages




89   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Items That Must Be Specifically Disclosed:

         •      Creditor
         •      Amount financed
         •      Finance charge not itemized using such term
         •      APR, using such term
         •      Variable rate
         •      Payment schedule




90   |       A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Items That Must Be Specifically Disclosed:

         • Sum of the amount financed and the total finance charge
           using the term “total of payments”
               –    Demand feature
               –    Total sales price
               –    Prepayment penalties of rebates
               –    Late payment charges




91   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Items That Must Be Specifically Disclosed:

         • Where the closed-end credit is secured, a statement
           that a security interest has been taken in the
           property purchased as part of the transaction, or
           property not purchased as part of the transaction
           identified by item or type
               –    Insurance
               –    Certain security interest charges
               –    Contract references
               –    Mortgage assumption policy
               –    Required deposits
               –    Tax deductibility
               –    Pre-emption of usury laws

92   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Timing of Disclosures

         • Creditor must make good faith estimates of the disclosures
           required by Reg. Z before consummation or must deliver them
           or place them in the mail not less than three business days
           after the creditor receives the consumer’s written application,
           whichever is earlier




93   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Disclosure Requirements Imposed by
 Bankruptcy Abuse Prevention and
 Consumer Protection Act of 2005
             (BAPCPA)
     BAPCPA Disclosure Requirements

         • BAPCPA includes new Truth-in-Lending Act (TILA)
           disclosure requirements
               –    Minimum payments
               –    Tax deductions
               –    Temporary/promotional interest rates
               –    Late payment fees
               –    Early termination fees




95   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Minimum Payment Warnings

         • Printed on front of credit card billing statements

         • Informs consumers that if they make only minimum
           payment it will increase total amount of interest they will
           have to pay and take them longer to pay off balance

         • Specific examples using minimum payments, interest
           rates and principal balances must be provided




96   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Minimum Payment Warnings

         • Creditors must maintain a toll-free number for consumers
           to call with questions
               –    May be established or maintained by creditor or third party
               –    May offer information through automated prompts
               –    Must make provisions for consumers without touch-tone phones
               –    Credit unions with total assets less than $250,000,000 will be
                    eligible to use a toll-free number established by the government




97   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Mortgage and Tax Disclosures

         • Required when consumer is extended credit in return for
           an interest in his home

         • If extension of credit is greater than market value of
           consumer’s home, warning must be given that interest on
           portion of credit that exceeds market value is not tax-
           deductible




98   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
     Mortgage and Tax Disclosures

         • Must inform consumer that they should consult with a tax
           advisor for further information regarding deductibility of
           interest and charges




99   |    A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Temporary and Promotional Rates

      • “Temporary” defined to be a period of time of less than
        one (1) year

      • Creditors must clearly and conspicuously use term
        “Introductory” in immediate proximity to listing of a
        temporary annual percentage rate (APR)

      • Must clearly list APR that will apply after end of
        temporary period




100   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Temporary and Promotional Rates

      • If temporary/promotional rate is conditional on consumer
        not defaulting or other circumstances, creditor must
        provide general description of circumstances that will end
        promotional rate, as well as provide rate that will apply




101   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Late Payment and Early Terminations

      • If late fees will be imposed, creditor must clearly state on
        each billing statement:
              – Date on which payment is due
              – Date a late payment fee will be assessed
              – Amount of late payment fee




102   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Late Payment and Early Terminations

      • Previously, creditors could terminate open-end credit
        accounts if consumer had not incurred any finance
        charges

      • Under BAPCPA, creditor can only terminate if account is
        inactive for three (3) or more consecutive months




103   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Conclusion

      • Toll-free number and minimum payment warning will be
        effective sometime after 2006

      • Planning for changes will give creditors time to make
        required changes and ensure compliance




104   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Latest Changes to Regulation Z
      What We Thought Was Good News

  • Each sub-account is not required to have a self-replenishing
    credit limit;

  • Language was retained that views the plan as a whole, while
    some features may be used infrequently; and

  • CUs are permitted to verify information in certain
    circumstances to assure continued creditworthiness




106   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Applications and
      Solicitations
      • Format and content changes were adopted for credit and
        charge card application and solicitation disclosures,
        which include:

              – New format requirements for the summary table, including rules
                regarding:

                      • Type size and use of boldface type for certain key terms, and

                      • Placement of information




107   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Applications and
      Solicitations
      • Revised content, including:
              – A requirement that creditors disclose the duration that penalty
                rates may be in effect
              – A shorter disclosure about variable rates
              – New descriptions when a grace period is offered on purchases or
                when no grace period is offered
              – A reference to consumer education materials on the Board’s Web
                site




108   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Account-Opening
      Disclosures
      • Requirements for cost disclosures provided at account opening
        were adopted to make the information more conspicuous and
        easy to read, which include:

              – Disclosing certain key terms in a new summary table at account
                opening

                      • Table is substantially similar to table required for credit and
                        charge card applications and solicitations




109   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Account-Opening
      Disclosures
      • Adopting a different approach to disclosing fees, to
        provide greater clarity for identifying fees that must be
        disclosed

              – Creditors will have flexibility to disclose charges (other than those
                in the summary table) in writing and orally




110   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Periodic Statement
      Disclosures
      • Revisions were adopted to make disclosures on periodic
        statements more understandable, primarily by making
        changes to the format requirements, such as by grouping
        fees and interest charges together; changes include:

              – Itemizing interest charges for different types of transactions, such
                as purchases and cash advances, grouping interest charges and
                fees separately and providing separate totals of fees and interest
                for the month and year-to-date




111   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Periodic Statement
      Disclosures
      • Eliminating requirement to disclose an “effective APR”

      • Requiring disclosure of the effect of making only the
        minimum required payment on the time to repay
        balances, as required by BAPCPA




112   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Changes in Terms

      • Final rule expands the circumstances under which
        consumers receive written notice of changes in terms
        (e.g., an increase in the interest rate) applicable to their
        accounts, and increase the amount of time these notices
        must be sent before the change becomes effective;
        changes include:

              – Increasing advance notice before a changed term can be imposed
                from 15 to 45 days




113   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Changes in Terms

      • Requiring creditors to provide 45 days prior notice before
        creditor increases a rate either due to a change in terms
        applicable to consumer’s account or due to consumer’s
        delinquency or default or as a penalty

      • When a change-in-terms notice accompanies a periodic
        statement, requiring a tabular disclosure on the front side
        of the periodic statement of the key terms being changed




114   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Advertising
      Provisions
      • Rules governing advertising of open-end credit were
        revised to include:

              – Requiring advertisements that state a periodic payment amount
                on a plan offered to finance the purchase of goods and services to
                state, in equal prominence to the periodic payment amount, the
                time period required to pay the balance and the total of payments
                if only periodic payments are made




115   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Summary of Provisions: Advertising
      Provisions
      • Permitting advertisements to refer to a rate as “fixed”
        only if the advertisement specifies a time period for which
        the rate is fixed and the rate will not increase for any
        reason during that time, or if a time period is not
        specified, if the rate will not increase for any reason while
        the plan is open




116   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Miscellaneous Provisions

      • Rules were adopted that provide additional protections to
        consumers, including:

              – In setting reasonable cut-off hours for mailed payments to be
                received on the due date and be considered timely

                      • 5 pm is deemed to be a reasonable time




117   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Miscellaneous Provisions

      • Requiring creditors that do not accept mailed payments
        on the due date, such as on weekends or holidays, to
        treat a mailed payment received on the next business
        day as timely

      • Clarifying that advances that are separately underwritten
        are generally not open-end credit, but closed-end credit
        for which closed-end disclosures must be given




118   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
Credit CARD Act
      Background

      • July 22, 2009- Federal Reserve Board (Fed) published
        interim final rule to amend Reg Z to implement two
        provisions of Credit CARD Act
              – Interim regulations effective August 20, 2009, but open to public
                comment until September 21, 2009

      • Most of Act effective February 22, 2010, but two
        provisions were singled out to become effective 90 days
        after the law was enacted; therefore effective August 20,
        2009




120   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Section 101

      • Applies only to credit cards

      • Requires that change-in-term notices be provided at
        least 45 days in advance before increasing the APR or
        changing significant terms, rather than current 15-day
        notice period




121   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Section 106

      • Applies to all open-end credit, in addition to credit card
        accounts

      • Requires that periodic statements (PS) be provided at
        least 21 days before payment due date (or end of a
        grace period) in order for the CU to charge a late fee,
        report the account as delinquent to credit bureaus, or
        impose a penalty rate

      • The application of these provisions to all open-end credit
        plans presents significant compliance challenges for CUs




122   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Enactment of Credit CARD Act

      • CU industry was surprised to learn that the 21-day
        requirement would apply to all open-end credit

      • CUNA has inquired as to whether this language was a
        drafting error, but has not received a definitive answer

      • CU’s operational concerns are more extensive because
        many use consolidated PS




123   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      CUNA’s Efforts to Address This Problem

      • CUNA has been working nonstop with the Fed and
        Congress to limit the scope of these provisions to credit
        cards, or at a minimum, extend the effective date for
        open-end plans other than credit card accounts

      • CUNA has urged the Fed to use its authority under
        Section 105(a) of the Truth in Lending Act to provide
        relief, such as more time for compliance




124   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      CUNA’s Efforts to Address This Problem

      • At this time, CUNA can not provide any assurances that
        there will be relief from these provisions, so CUs need to
        proceed now with their compliance efforts

      • CUNA is urging CUs to submit their comments to the Fed
        immediately on the operational burden created by the
        interim final regulation and the lack of adequate
        compliance guidance
              – http://cuna.org/reg_advocacy/reg_call/rec_073009.html




125   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
       Credit CARD Act:
  What Credit Unions Must Do to
Comply With the 21-Day Requirement
      Overview of the Regulatory Requirements

      • Section 226.5(b)(2)(ii): Creditors must adopt reasonable
        procedures designed to ensure that periodic statements
        are mailed or delivered at least 21 days prior to the
        payment due date and the date on which any grace
        period expires. A creditor that fails to meet this
        requirement shall not treat a payment as late for any
        purpose or collect any finance or other charge imposed
        as a result of such failure. For purposes of this
        paragraph, ‘grace period’ means a period within which
        any credit extended may be repaid without incurring a
        finance charge due to a periodic interest rate.”




127   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Overview of the Regulatory Requirements

      • To address concerns about the short compliance period,
        Fed will allow creditors to meet compliance obligations
        with the 21-day rule “for a short period of time” by
        including language on or with the PS that payments are
        not due until at least 21 days after the PS is delivered,
        regardless of the due date that is reflected on the PS




128   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Alternative Compliance Approaches Credit
      Unions Are Considering
      • How your CU decides to comply will depend on:
              – Your reliance on consolidated PS
              – Capabilities of your data processing system
              – Compliance costs you will have to incur by pursuing different
                options
              – Contractual constraints
              – Staffing considerations
              – Other factors




129   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Alternative Compliance Approaches Credit
      Unions Are Considering
      • We will discuss four possible approaches CUs are
        considering for complying with the 21-day requirement
        for open-end loan programs as well as pros and cons
        associated with each

      • NCUA responsible for enforcing compliance with TILA
        regulations for federal CUs; FTC has similar enforcement
        authority over state-chartered CUs




130   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Alternative Compliance Approaches Credit
      Unions Are Considering
      • One alternative being pursued by some CUs, but that
        most would find unacceptable is to not charge late fees
        or take other adverse actions against the borrower if the
        CU does not comply with the 21-day requirement




131   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #1: Change Due Dates to
      Establish a Uniform Payment Due Date
      • Change mandatory payment due dates for all loan
        accounts of a member to one date at least 21 days after
        PS is mailed/delivered

      • Members could voluntarily make their payments earlier in
        the month if they choose to do so and could continue
        paying on the same cycles they do now, as long as
        mandatory payment due date is at least 21 days after PS
        is mailed




132   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #1: Change Due Dates to Establish
      a Uniform Payment Due Date - PROS
      • Complies with requirements of new law

      • Parallels how Congress envisioned compliance will work
        for credit card accounts and Fed staff has commented
        favorably on this approach

      • PS could contain all open-end loans and continue to
        include share and share draft information




133   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #1: Change Due Dates to Establish
      a Uniform Payment Due Date - PROS
      • Members could continue making voluntary partial/full
        payments on other dates as long as entire payment is
        made by new due date
      • No change-in-terms notice is required under Reg Z to
        change the payment due date
      • Different members could have different mandatory due
        dates which would allow a CU to stagger the mailing of
        the PS; this would help manage cash flow issues and
        demands on member service reps
      • Member education can help explain how the CU is
        maintaining payment options for a member, while
        complying with the new requirements



134   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #1: Change Due Dates to Establish
      a Uniform Payment Due Date - CONS
      • Would require a number of changes in CU’s systems,
        such as aggregating voluntary payments made more
        often than monthly

      • Bi-weekly, weekly or semi-monthly payment due dates
        that are set by contract will have to be changed to one
        contractual payment due date in order to confirm to the
        21-day requirement

      • Especially for smaller CUs, cash flow could become an
        issue if payments actually come around the same time of
        the month



135   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #1: Change Due Dates to Establish
      a Uniform Payment Due Date - CONS
      • Large CUs typically send out PS in cycles throughout the
        month which may make designating dates more
        challenging

      • Demands on member service reps might spike at month-
        end if most payments are due around the same date

      • Member education will be needed to explain why a
        uniform payment due date is being established




136   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #1: Change Due Dates to Establish
      a Uniform Payment Due Date - CAUTION
      • CUs need to review the language in their loan
        documents concerning the right to make certain
        changes, how they characterize loan repayment terms,
        etc.

      • CUs should check with their legal counsel to determine
        whether any notice of changes in payment due dates
        may be required by state law (this is not a problem under
        Reg Z)




137   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #2: Print on the Periodic Statement the
      Current and Following Month’s Payment Due Dates

      • CU would not change any of its payment due dates, but
        rather print on current PS the current month’s payment
        due date(s), which in many cases will not comply with the
        21-day timing requirement, as well as the due date(s) for
        the following month

      • Fed attorneys have indicated that this may not comply
        with the “spirit” of the law/regulation




138   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #2: Print on the Periodic Statement the
      Current and Following Month’s Payment Due Dates

      • To implement this approach, CU may need a
        “transitional” month in which it either skips charging late
        fees or supplies the permitted temporary notice on the
        PS or PS insert

      • After transition, CU will then be on track to indicate each
        future due date on both current and previous month’s PS




139   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #2: Print on the Periodic Statement the
      Current and Following Month’s Payment Due Dates

      • How this works:

              – PS is generated and mailed 9/30 and reflects upcoming due date
                of 10/15 and due date for following month- 11/15

              – 10/15 due date is less than 21 days from the PS mailing date of
                9/30, 11/15 date is more than 21 days from PS mailing date and
                10/15 date would have been disclosed in prior month’s PS, which
                would be in compliance with 21-day requirement




140   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #2: Print on the Periodic Statement the
      Current and Following Month’s Payment Due
      Dates- PROS
      • May be lowest cost method for compliance

      • May be easiest to accomplish operationally

      • Some CUs have obtained legal opinions from their
        counsel saying this approach complies with new
        requirement




141   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #2: Print on the Periodic Statement the
      Current and Following Month’s Payment Due Dates
      - CONS
      • May generate confusion from members, which will
        require substantial member education

      • Fed staff believes this method may be contrary to intent
        of the law and may indicate in the future that this option
        is not compliant with the rule
              – CUs that have adopted this approach would be required to adopt
                a different option at further expense and may be exposed to
                liability for the period they are using this approach




142   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #2: Print on the Periodic Statement the
      Current and Following Month’s Payment Due Dates
      - CAUTION
      • Consultation with CU’s attorney is appropriate

      • Will require a transition time after 8/20, in which case the
        CU would either not be able to treat the payment as late
        or would use the alternative that the Fed provides for a
        “short period of time” in which it indicates that the
        consumer has 21 days to make the payment, regardless
        of due date on PS




143   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #3: Retain Existing Due Dates and
      Send Out Additional Periodic Statements
      • CUs would establish multiple billing cycles with
        corresponding PS mailed on different dates so that each
        individual PS is mailed at least 21 days prior to a specific
        due date or range of due dates
              – Ex: PS mailed on 9/3 covering billing cycle from 8/1 to 8/31 would
                be provided at least 21 days prior to payment due dates ranging
                from 9/24-9/30

      • End result: separate PS for many, if not all, loans




144   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #3: Retain Existing Due Dates and Send
      Out Additional Periodic Statements - PROS

      • Complies with requirements of new law
      • Members would retain existing loan payment due dates
        for loans with monthly payments
      • Share and share draft information could be mailed in a
        separate PS if members desire such information be
        provided on a monthly basis; otherwise, it could be
        included along with loan information for a particular
        billing cycle
      • For members with multiple loans, those loans with
        payment due dates that are within a range of payment
        due dates for each PS /billing cycle could be combined
        on same PS



145   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #3: Retain Existing Due Dates and Send
      Out Additional Periodic Statements - CONS

      • CU’s mailing and process costs would increase
        dramatically
      • Bi-weekly, weekly, or semi-monthly contractual payment
        due dates still would have to be changed to one
        contractual due date in order to comply with 21-day
        timing requirement
      • Members used to consolidated PS could receive
        numerous PS, increasing confusion and questions
      • Four or more separate billing cycles may be necessary to
        accommodate all payment due dates




146   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #3: Retain Existing Due Dates and Send
      Out Additional Periodic Statements - CAUTION

      • CU that retains existing due dates and changes the date
        of its PS based upon new or existing multiple billing
        cycles will need to closely review requirements of Reg Z
        regarding “billing cycles” to determine if a change-in-
        terms notice is required




147   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #4: Use the Special Notice on the Periodic
      Statement Throughout the Fall and Investigate Alternatives
      While Final Regulations Are Being Developed

      • CU would provide on the first PS issued after 8/20 the
        special notice allowed by the Fed which states that,
        regardless of the payment due dates printed on the PS,
        the member has 21 days to pay without penalty




148   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #4: Use the Special Notice on the Periodic
      Statement Throughout the Fall and Investigate Alternatives
      While Final Regulations Are Being Developed - PROS

      • CU that choose this approach will have benefit of
        assessing what other CUs have done in the weeks and
        months after 8/20 to determine what is cost-effective and
        what has resulted in the least problems with systems
        conversion and membership confusion
      • This approach protects a CU from implementing a
        compliance program that Fed later decides is
        unacceptable, which would require additional changes in
        operational systems
      • Might allow Cu to do a comprehensive assessment of
        what other changes should be made in its systems to
        prepare for other open-end changes effective 7/1/2010




149   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Approach #4: Use the Special Notice on the Periodic
      Statement Throughout the Fall and Investigate Alternatives
      While Final Regulations Are Being Developed - CONS

      • Legislative or regulatory relief that would totally eliminate
        this compliance requirement is highly uncertain
      • A CU choosing this approach would need to closely
        monitor any automated systems to make sure that
        actions are not taken inconsistent with the special notice
        provided to members, such as triggering late payment
        fee assessments based on date printed on PS, and take
        steps to communicate with members on their rights to
        have 21 days to make a payment on any open-end loan
      • CU that does not appear to be making a reasonable
        attempt to comply with requirements of the law may face
        an increased risk of litigation or an enforcement action by
        NCUA/FTC



150   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
       Credit CARD Act:
  What Credit Unions Must Do to
Comply With the 45-Day Requirement
      Overview of Regulatory Requirements

      • Starting 8/20, CU must provide a 45-day advance notice
        if it increases the interest rate or makes other significant
        changes to the terms of the credit card agreement

      • Must also be a disclosure of the borrower’s right to
        cancel the account prior to the effective date of the rate
        increase or the change in the significant term




152   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Overview of Regulatory Requirements

      • Interim final rule will apply to change-in-terms notices
        that are issued on or after 8/20/09

      • For promotional rate programs that end after 8/20,
        creditor will not be able to raise the rate after the
        promotional period, unless creditor has previously
        disclosed the term and the rate or type of rate that will
        apply after the term ends, regardless of whether notice is
        provided before or after 8/20

      • Exception described for payments that are more than 60
        days late will apply even if the 60-day period began
        before 8/20


153   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Exceptions

      • If change is due to an expiration of a specified period of
        time, provided that the length of this time period and the
        rate that would then apply were disclosed to consumer
        before this time period began
              – Disclosure must be in writing
              – Rate that applies after period ends may not exceed rate before
                this time period began
              – Card issuers offering deferred interest or similar programs may
                use this exception




154   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Exceptions

      • If the rate is variable and is increased according to the
        operation of a publicly available index that is not under
        the control of the creditor




155   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Exceptions

      • If the rate increase is due to the completion of, or failure
        to comply with, the terms of a workout or temporary
        hardship agreement, as long as the terms were disclosed
        in writing to the consumer before the commencement of
        the agreement
              – Rate that would then apply must not be higher than the rate that
                applied before the workout/temporary hardship agreement
              – All these rates need to be disclosed and any rates disclosed that
                are variable must state that the rate may vary and how it is
                determined
              – Disclosure must also state that consumer must make timely
                minimum payments to remain eligible for this arrangement, if
                applicable




156   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Notice of Right to Cancel

      • Notice must include brief description of right to cancel the
        account before the effective date of the rate increase or
        other change disclosed

      • CARD Act also states that closing or cancelling account
        pursuant to this right to cancel will not constitute a default
        under the existing cardholder agreement and does not
        trigger an obligation to immediately repay the obligation
        in full




157   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Notice of Right to Cancel

      • Borrower who cancels card has to be given the right to
        repay the outstanding balance through a method no less
        beneficial than either:
              – A payment schedule that amortizes the balance over five years or
                more; or
              – A minimum payment that is a percentage of the balance that is no
                more than twice the percentage that applied before the
                cancellation of the account
              – The method of repayment currently required by the account
                agreement




158   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Types of Loans Covered

      • 45-day notice will only apply to credit cards not secured
        by a home under the 8/20/09 effective date

      • Open-end lines of credit that are not credit card accounts
        will be subject to the revised change-in-terms notice
        requirements that are outlined in the Reg Z rule that was
        issued in 1/09 and which is effective 7/1/10




159   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Significant Changes That Will Require 45-
      Day Notice
      • APRs for purchases, cash advances or balance transfers
              – Includes any discounted initial rate, premium initial rate or penalty
                rate

      • Fees in connection with the issuance and availability of a
        credit card account, including fees for account activity or
        inactivity

      • Fixed finance charges or a minimum interest charge if it
        exceeds $1

      • Transaction charges imposed for the use of the account



160   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Significant Changes That Will Require 45-
      Day Notice
      • Grace periods

      • Balance computation methods

      • Cash advance, late payment, over-the-limit, and balance
        transfer fees, as well as returned payment fees

      • Required insurance, debt cancellation or debt
        suspension fees




161   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Insignificant Changes

      • For terms that are not “significant”, creditor may disclose
        these changes by either giving the 45-day notice or
        providing notice of the amount of the charge before the
        consumer agrees to or becomes obligated to pay the
        charge, at a time and in a manner that consumer would
        likely notice the disclosure




162   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Insignificant Changes

      • Examples:
              –    Charges for documentary evidence
              –    Reduction in finance charges
              –    Suspension of future credit privileges
              –    Termination of an account or plan
              –    When a change results from an agreement involving a court
                   proceeding




163   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Content of Notice

      • Description of change and a statement that change is
        being made to the account

      • Date change becomes effective

      • Consumer’s right to reject change prior to effective date,
        unless change is an increase in the required minimum
        payment or the consumer fails to make a required
        minimum payment within 60 days after the due date




164   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Content of Notice

      • Instructions for rejecting the change, along with a toll-free
        telephone number the consumer may use to notify the
        creditor of the rejection

      • If applicable, a disclosure that if the consumer rejects the
        change, then the consumer’s further use of the account
        will be terminated or suspended




165   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Content of Notice In Connection With a
      Delinquency, Default or Penalty
      • Increased rate has been triggered and date that it will
        apply
      • Circumstances in which increased rate will no longer
        apply
      • Consumer’s right to reject the penalty rate prior to
        effective date, unless consumer makes a payment that is
        more than 60 days late
      • Instructions for rejecting change, including a toll-free
        number
      • If applicable, that the consumer’s further use of the
        account will be terminated or suspended if he/she rejects
        the increased rate



166   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      When Notice is Not Required

      • For rate increases due to consumer’s failure to comply
        with terms of a workout/temporary hardship agreement

      • For penalty rates imposed when a consumer exceeds
        the credit limit




167   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Consumer’s Right to Reject the Changes

      • Consumers have the substantive right to reject the
        change if the creditor is notified before the effective date
              – This expands the CARD Act provisions, which only included the
                disclosure requirements
              – If change is rejected, creditor may not apply that change, increase
                a rate, impose a fee, or otherwise treat the account as being in
                default
              – Creditors may, however, terminate or suspend the account if the
                consumer rejects the rate increase or changed term




168   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Effect of Rejection of Changes

      • For a rate increase, change in significant terms or for
        delinquencies or defaults, creditor also may not require
        repayment of the account in full or in a manner any less
        beneficial than amortizing the balance for at least five
        years or no more than doubling the minimum percentage
        due each month or the repayment method that is current
        in the account agreement




169   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Effect of Rejection of Changes

      • However, a previously disclosed “floor” for minimum
        payments may still be imposed if at some point the floor
        exceeds the payment that would apply under one of
        these two repayment methods

      • For the five-year amortization period, creditors are also
        not required to recalculate these payments if the
        consumer makes more than the minimum payment, and
        payments may be adjusted if a variable rate changes to
        ensure that payments are completed by the end of the
        five-year period




170   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Effect of Rejection of Changes

      • These protections will not apply for accounts that are
        more than 6-days delinquent or for transactions that
        occur more than 14 days after notice is provided

      • Creditor may also place reasonable requirements on how
        consumers may reject the change, such as requiring the
        primary accountholder to provide notification of rejection
        or requiring accountholder to supply the account number




171   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Effect of Rejection of Changes

      • If the account used for transactions that occur more than
        14 days after the notice is provided, then the creditor
        may apply the rate increase or changed term to those
        specific transactions even if the consumer rejects the
        change or increased term prior to the effective date

      • Creditors may use the date the transaction is charged to
        the account to determine if it meets the 14-day
        requirement, as opposed to when the transaction is
        posted to the account




172   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Effect of Rejection of Changes

      • Creditors may not apply the increased rate to the time
        period before the effective date of the change and other
        changes can only apply to transactions occurring after
        that time, not the entire account




173   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
         Credit CARD Act:
Provisions That Have Been Implemented
          by August 20, 2009
      Advance Notice of Rate Increase or
      Significant Change
      • Credit card creditor must provide a written notice of:
              – An increase in an APR not later than 45 days prior to the effective
                date of the increase
              – Any significant change of the cardholder agreement not later than
                45 days prior to the effective date of change

      • Notice must contain brief statement of right of credit card
        obligor to cancel account before effective date of rate
        increase or other change




175   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Advance Notice of Rate Increase or
      Significant Change
      • Exceptions:
              – Scheduled increases
              – Variable rate plans
              – Workouts




176   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Voluntary Closure or Cancellation

      • If obligor closes/cancels credit card account, event must
        not be considered a default and must not trigger an
        obligation to immediately repay the obligation in full or
        through a method less beneficial than:
              – Amortization period of not less than 5 years
              – Required minimum payment that includes a percentage of the
                outstanding balance equal to not more than twice the percentage
                required before the closure or cancellation

      • Must not trigger imposition of any other penalty or fee




177   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Timing of Payments

      • Creditor may not treat payment on an open-end
        consumer credit plan as late for any purpose unless it
        has adopted reasonable procedures to ensure each
        periodic statement (PS) is mailed/delivered to consumer
        not later than 21 days before payment due date




178   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Timing of Payments

      • If a grace period applies to avoid incurring an additional
        finance charge on any portion of credit extended,
        additional finance charge may not be imposed with
        respect to that portion of credit extended for the billing
        cycle of which the grace period is a part, unless a
        statement including the amount on which the finance
        charge for the period is based was mailed or delivered to
        the consumer not later than 21 days before grace
        period’s ending date

      • This provision affects all open-end consumer credit, not
        just credit cards




179   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
         Credit CARD Act:
Provisions That Must be Implemented by
           February 22, 2010
      Posting of Account Agreements

      • Credit card issuers must post its credit card agreements
        on an Internet site and provide them to the Federal
        Reserve Board
              – Fed must maintain a central repository on Internet of credit card
                agreements it has received, easily accessible and retrievable by
                the public

      • Does not apply to individually negotiated changes to
        contractual terms, such as workouts




181   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Minimum Payment Warning

      • PS must include the following statement:
              – “Minimum Payment Warning: Making only the minimum required
                payment will increase the amount of interest you pay and the time
                it takes to repay your balance.”




182   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Minimum Payment Warning

      • PS must include:
              – Number of months it would take to pay entire amount of balance if
                consumer made only the required minimum payments each
                month and if no further advances occurred
              – Total cost to consumer, including interest and principal payments,
                of paying balance in full, if consumer made only required monthly
                payments and if no further advances occurred
              – Monthly payment amount that would be required for consumer to
                eliminate outstanding balance in 36 months, if no further advance
                occurred, and total cost to consumer, including interest and
                principal payments, of paying balance in full over 36 months, and
              – Toll-free number through which consumer could obtain
                information about accessing credit counseling and debt
                management services




183   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Late Payment Deadline

      • If a late fee or charge may be imposed for a late
        payment, PS must disclose, in a conspicuous location,
        date on which payment is due or, if different, date on
        which late payment fee will be charged, together with
        amount of fee or charge

      • If one or more late payments may result in a penalty
        APR, disclosure must include conspicuous notice of this
        fact, together with applicable penalty APR, in close
        proximity to payment due date




184   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Payment at Local Branches

      • If a creditor is a financial institution that maintains
        branches/offices at which credit card payments are
        accepted from the obligor in person, date on which
        obligor makes a payment at the branch/office must be
        treated as date on which payment is made for purposes
        of determining whether late fee/charge may be imposed




185   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Applications from Underage Consumers

      • Credit card may not be issued to, or an open-end
        consumer credit plan established by or on behalf of, any
        consumer who has not attained the age of 21, unless
        consumer has submitted a written application with
        financial information establishing an independent means
        of repayment or the application includes a cosigner over
        age 21 who will be jointly liable for debts incurred before
        consumer attains age 21

      • Applies not just to credit cards, but all open-end
        consumer credit plans




186   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Disclosures Before Renewal

      • A credit/charge card issuer that has changed/amended
        any term of the account since the last renewal without
        disclosure or that imposes any annual fee, other periodic
        fee or membership fee for the issuance or availability of a
        credit card, must transmit to consumer at least 30 days
        before scheduled renewal date a clear and conspicuous
        disclosure




187   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Disclosures Before Renewal

      • Disclosure must include:
              – Date, month or billing period at close of which the account will
                expire if not renewed
              – Application and solicitation disclosures that would apply if the
                account were renewed
              – Method by which consumer may terminate continued credit
                availability




188   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Prohibition of Double-Cycle Billing and
      Penalties for On-time Payments
      • Creditor may not impose any finance charge on a credit
        card account as a result of the loss of any time period
        (“grace period”) provided by creditor within which obligor
        may repay any portion of credit extended without
        incurring a finance charge with respect to:
              – Any balance for days in billing cycles that precede the most recent
                billing cycle
              – Any balances or portions of balances in the current billing cycle
                that were repaid within that time period

      • Prohibition does not apply to any adjustment to a finance
        charge as a result of the resolution of a dispute or as a
        result of the return of a payment for insufficient funds



189   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Opt-In Required for Over-the-Limit
      Transaction Fees
      • Before a creditor may impose a fee for any over-the-limit
        transaction on a credit card account, consumer must
        expressly elect to permit creditor to complete transaction,
        following disclosure

      • Before effecting transaction, creditor must provide notice
        in the form prescribed by the Fed

      • If consumer makes the election, creditor must provide
        notice to consumer of right to revoke election, in the form
        prescribed by the Fed, in any PS that includes notice of
        the imposition of an over-the-limit fee during the period
        covered by the statement


190   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Opt-In Required for Over-the-Limit
      Transaction Fees
      • Consumer may make or revoke election orally,
        electronically or in writing
      • Same options must be available for both making and
        revoking the election
      • Consumer may make the election at any time and it is
        effective until revoked
      • Fed must prescribe regulations governing required
        disclosures and preventing unfair or deceptive practices
        in connection with the manipulation of credit limits
        designed to increase over-the-limit fees or other penalty
        fees




191   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Opt-In Required for Over-the-Limit
      Transaction Fees
      • Provision doesn’t prevent a creditor from completing an
        over-the-limit transaction, so long as consumer who has
        not made a valid election is not charge an over-the-limit
        fee

      • Fee may be imposed only once during a billing cycle if
        credit limit is exceeded

      • Fee may be imposed only once in each of the two
        subsequent billing cycles, unless consumer has obtained
        an additional extension of credit in excess of the credit
        limit during any subsequent cycle or the consumer
        reduces the outstanding balance below the credit limit as
        of the end of that cycle

192   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Limit on Fees Related to Method of Payment

      • Creditor may not impose a separate fee to allow obligor
        on a credit card account to make a payment, whether
        payment is by mail, electronic transfer, telephone
        authorization, or other means, unless payment involves
        an expedited service by a service representation of the
        creditor




193   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Use of Term “Fixed Rate”

      • Use of term “fixed rate” is prohibited in conjunction with
        an APR or interest rate on a credit card account except
        when used with an APR or interest rate that will not
        change or vary for any reason over a period clearly and
        conspicuously specified in terms of the account




194   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Standards Applicable to Initial Issuance of
      Subprime or “Fee Harvester” Cards
      • If terms of a credit card account require the payment of
        any fees (other than late fee, over-the-limit fee or fee for
        a payment returned for insufficient funds), in the first year
        during which account is opened in an aggregate amount
        in excess of 25% of total amount of credit authorized
        when account is opened, no payment of any fees may be
        made from creditor made available




195   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Payment Due Dates

      • Due date for a credit card account must be the same day
        each month

      • If this date is a day on which creditor does not receive or
        accept payments by mail (including weekends and
        holidays), creditor may not treat payment received on
        next business day as late for any purpose




196   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Co-Signor Approval for Minor Accounts

      • No increase may be made in the credit limit of a credit
        card account for which a parent, legal guardian, spouse
        of the consumer or any other individual has assumed
        joint liability for debts incurred by consumer in connection
        with the account before the consumer attains age 21,
        unless parent, guardian or spouse approves in writing
        and assumes joint liability for the increase




197   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      College Card Agreements

      • Creditors must submit an annual report to the Fed
        containing the terms and conditions of all business,
        marketing and promotional agreements with an institution
        of higher education, or an alumni organization or
        foundation affiliated with or related to the institution, with
        respect to any college student credit card account issued
        to a college student at the institution




198   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      College Card Agreements

      • Report must include:
              – Any memorandum of understanding between or among a creditor,
                an institution of higher education, an alumni association or
                foundation that directly or indirectly relates to any aspect of any
                agreement described previously or controls or directs any
                obligations or distribution of benefits between or among those
                entities
              – Amount of any payments from the creditor to the institution,
                organization or foundation during the period covered by the report
                and the precise terms of any agreement for which the amounts
                are determined
              – Number of credit card accounts covered by any agreement
                opened during the period covered by the report and the total
                number of credit card accounts covered by the agreement that
                were outstanding at the end of that period




199   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Statutory Damages in Individual Actions

      • Statutory damages for violations of TILA’s provisions
        governing open-end (not secured by real property or a
        dwelling) credit plans equal to twice the amount of any
        finance charge in connection with the transaction, with a
        minimum of $500 and a maximum of $5,000, or “such
        higher amount as may be appropriate” in the case of an
        established pattern or practice of compliance failures




200   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Expansion of Disclosure Violations Subject
      to Statutory Damages
      • Disclosure violations for which statutory damages are
        available now include:
              – Minimum payment warning disclosures
              – Late payment deadline disclosure
              – Disclosure of increase in interest rates for late payments




201   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Credit Card Protections for College Students

      • Institutions of higher education must publicly disclose
        any contract or other agreement made with a card issuer
        or creditor for the purpose of marketing a credit card

      • Card issuers/creditors may not offer a student any
        tangible item to induce the student to apply for or
        participate in an open-end credit plan if the offer is made:
              – On campus,
              – Near the campus, or
              – At an event sponsored by or related to an institution of higher
                education




202   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Procedure for Timely Settlement of Estates
      of Decedent Obligors
      • Fed must prescribe regulations requiring any credit card
        creditor to establish procedures to ensure that any
        administrator of an estate of any deceased obligor can
        resolve outstanding credit card balances in a timely
        manner




203   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Consideration of Ability to Repay

      • Card issuer may not open a credit card account or
        increase any credit limit on an account unless they
        consider the ability of consumer to make the required
        payments under the terms of the account




204   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Prompt and Fair Crediting of Payments

      • Payments must be posted promptly as specified in
        regulations of the Fed
      • Finance charge may not be imposed if creditor has
        received obligor’s payment in readily identifiable form by
        5:00 p.m. on the date on which payment is due in the
        amount, manner and location indicated by the creditor to
        avoid imposition of a finance charge
      • Card issuer must apply amounts in excess of the
        minimum payment amount first to the card balance
        bearing the higher rate of interest and then to each
        successive balance bearing the next highest rate of
        interest, until the payment is exhausted




205   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Prompt and Fair Crediting of Payments

      • For deferred interest arrangements, creditor must
        allocate entire amount paid by consumer in excess of
        minimum payment to a balance on which interest is
        deferred during last two billing cycles immediately
        preceding expiration of the period during which interest is
        deferred




206   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Prompt and Fair Crediting of Payments

      • If card issuer makes material change in the mailing
        address, office or procedures for handling cardholder
        payments, and the change causes a material delay in the
        crediting of a cardholder payment made during the 6-day
        period following the date on which the change took
        effect, card issuer may not impose any late fee or finance
        charge for a late payment on the credit card account to
        which payment was credited




207   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Limits on Increases Applicable to
      Outstanding Balances
      • Credit card creditor can not increase any APR, fee or
        finance charge applicable to any outstanding balance
        except for these four increases:
              – An APR increase upon the expiration of a specific period of time
                if:
                   • Prior to the commencement of that period, creditor disclosed
                     the length of the period and the APR that would apply after
                     expiration of the period
                   • Increased APR does not exceed rate disclosed
                   • Increased APR does not apply to transactions occurring
                     before the commencement of the period
              – An increase in a variable APR in accordance with a credit card
                agreement that provides for changes in the rate according to
                operation of an index outside the control of the creditor and
                available to the general public



208   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Limits on Increases Applicable to
      Outstanding Balances
              – An increase due to completion of a workout/temporary hardship
                agreement by the obligor or obligor’s failure to comply with terms
                of a workout/temporary hardship agreement if:
                  • APR, fee or finance charge applicable to a category of
                    transactions following an increase does not exceed the rate,
                    fee or finance charge that applied to that category of
                    transactions following an increase does not exceed the rate,
                    fee or finance charge that applied to that category of
                    transactions prior to the commencement or the arrangement
                  • Creditor provided the obligor, prior to the commencement of
                    the arrangement, clear and conspicuous disclosure of the
                    terms of the arrangement




209   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Limits on Increases Applicable to
      Outstanding Balances
              – An increase solely to the fact that a minimum payment has not
                been received by the creditor within 60 days after its due date if
                the creditor:
                  • Includes, with notice of the increase, a clear and conspicuous
                    written statement of the reasons for the increase and that the
                    increase will terminate not later than 6 months after the date
                    on which it is imposed if a creditor receives the required
                    minimum payments on time during that period
                  • Terminates the increase not later than 6 months after the date
                    on which it is imposed if the creditor receives the required
                    minimum payments on time during that period




210   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Repayment of Outstanding Balances

      • Creditor must not change terms governing repayment of
        outstanding balance on a credit card, except that creditor
        may provide obligor with one of the following methods for
        repayment, or a method no less beneficial to the obligor
        than one of these methods:
              – Amortization period of not less than 5 years, beginning on the
                effective date of the increase set forth in the noticed
              – Required minimum payment that includes a percentage of the
                outstanding balance equal to not more than twice the percentage
                required before the effective date of the increase set forth in the
                notice




211   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Limit on Interest Rate Increases During the First
      Year (or 6 Months for Promotional Rates)
      • Except for the four increases allowed by Section 171(b),
        no increase in any APR, fee or finance charge may be
        effective before the end of the one-year period beginning
        on the date the account is opened

      • No increase in any promotional APR may be effective
        before the end of the six-month period beginning on the
        date on which the promotional rate takes effect




212   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
 Credit CARD Act:
Post-February 22,2010
Implementation Dates
      Reasonable Penalty Fees

      • Any penalty fee or charge a credit card issuer may
        impose in connection with any omission with respect to
        or violation of a cardholder agreement, including any late
        payment fee, over-the-limit fee, or any other penalty fee
        or charge, must be reasonable and proportional to the
        omission or violation




214   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Interest Rate Reduction

      • If a creditor increased the APR applicable to a credit card
        account, based on factors including the credit risk of the
        obligor, market conditions or other factors, the creditor
        must consider changes in those factors in subsequently
        determining whether to reduce the APR for that obligor




215   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Interest Rate Reduction

      • Creditor must:
              – Maintain reasonable methodologies for assessing the factors
              – Not less frequently than once every 6 months, review accounts as
                to which the APR has been increased since January 1, 2009 to
                assess whether the factors have changed (including whether any
                risk has declined)
              – Reduce the APR previously increased when a reduction is
                indicated by the review
              – In the event of an increase in the APR, provide in the written
                notice required, a statement of reasons for the increase




216   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
MDIA
UDAP
Workshop and Updates
      Questions & Discussion

      • Any questions?




220   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA
      Thank you

      • Contact Us

              Robert Rutkowski
              Partner, Credit Union Practice Group
              Weltman, Weinberg & Reis Co., L.P.A.
              (216) 739-5004
              rrutkowski@weltman.com

              www.weltman.com
              www.thatcreditunionblog.com




221   |   A Business Approach to Credit Policy, Management and Debt Recovery   WELTMAN, WEINBERG & REIS CO., LPA

				
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