CARD ACT WEB 211 by liaoxiuli



                                                      August 11, 2009
  The information presented in this educational session is provided with the understanding that the Illinois Credit Union League is not engaged in
rendering legal or other professional advice. The information is provided to the credit union as a foundation for further investigation and study with
                                                its retained attorneys and other professional advisers.

•   Background of the Act
•   Compliance Requirements
•   Compliance Timelines
•   August 20, 2009 Requirements
•   February 22, 2010 Tentative Requirements
•   August 22, 2010 Tentative Requirements
•   Questions

              The CARD Act
• H.R. 627 enacted May 22, 2009
• FRB Interim Rule amending Reg Z, Issued July
  15, 2009
• FRB additional Rules in the fall for provisions that
  go into effect on Feb 22 and August 22, 2010
• Unfair and Deceptive Acts and Practices (UDAP)
  January 2009 still applicable

    Compliance Requirements –
        August 20, 2009
• Mailing of Periodic Statements at least 21
  days before payment is due (Title I Section 163)
• Timing of Notice of Rate Increases and
  Significant Changes minimum 45 Days
  advance notice
           Periodic Statements-
             August 20, 2009
• Mailing of Periodic Statements 21 days prior to
  payment due date and expiration of grace
• Applies to all Open-end consumer credit
• Must comply in order to consider a payment
  late and to assess late fees
• “for a Short Period of time after August 20”

Notice of Increase or Significant
• 45 Day Advance Notice
• Right to cancel account prior to the
  effective date
• Not required if the consumer has agreed to
  the change
• Notice must contain date of APR change,
  APR changing to, opt-out requirements

   Notice Requirement Exceptions
• Notice is not required for:
• Increase in a variable rate card based on an index
• Increase of a promotional rate or reduced rate provided there is
  disclosure prior to the commencement of the promotion of the
  rate and the length of time applicable and what the APR will
  be at the expiration of the promotion
• Increase due to the failure to comply with an agreed upon
  workout or temporary hardship arrangement prior to the
  commencement of the arrangement
• Reduction in APR or other charges, cancelling usage of the
  credit line or termination of account.

 “Significant Changes” requiring
     45 Day Advance Notice
• APR’s for purchases, cash advances, or balance
  transfers, inclusive of discounted initial rate,
  premium initial rate, or penalty rate
• Fees tied to the issuance and availability of the
  credit card account, account activity or inactivity
• Fixed Finance charges or minimum interest charge
  if it exceeds $1
• Transaction charges for use of the account

 “Significant Changes” requiring
  45 Day Advance Notice- cont’d
• Grace periods
• Balance computation methods
• Cash advance, late payment, over-the-limit, and
  balance transfer fees as well as returned
  payment fees
• Debt cancellation or suspension fees

    Notice Requirements for Changes Right to
                   Opt Out
• Describe the change and state that it is being made to the account
• Clearly state the date the change becomes effective
• Consumer’s right to reject the change prior to the effective date
• Instructions for rejecting the change, along with a toll free number
  the consumer may use to advise the creditor of rejection
• Disclosure that if the consumer rejects the change, then the
  consumer’s further use of the account will be terminated or
• Not required to pay the account in full if OPT-out exercised

       45 Day Advance Notice
       additional requirements
• Required when the rate is increased due to
  delinquency, default, or penalty
• Must be provided after the occurrence of the
  event causing the rate increase
• Excludes HELOC’s tied to credit card

     45 Day Advance Notice
 Delinquency, default, or penalty
• Notice must state:
• Increased rate has been triggered and the date it will apply
• Circumstances in which the rate will no longer apply (ie
  pay account current during notice period)
• Right to OPT-Out prior to the effective date, unless the
  consumer makes a payment that is more than 60 days late
• Additional requirement as of February 22, 2010 - Rate is in
  effect for 6 months and consumer must meet minimum
  payment requirements during this period for rate to be
  restored to the prior APR

Where Are We with Credit Cards
     for August 20, 2009
• Statements Required 21 days prior to payment
  due date – IN COMPLIANCE
• Punitive APR Increases 45 Day Notice-
  Available Sept 4, 2009
• Interim solution turn off Punitive APR’s while
  developing the language for the notice and re-
  activate for Sept 4, 2009 Compliance

             Compliance for
            February 22, 2010
• Payment due dates must be the same every
  month or the next business date
• Cannot charge fees for processing payments
  unless a service representative is used for an
  expedited payment
• OPT- in required by the consumer for the
  extension of credit over the credit limit and the
  applicability and amount of Overlimit Fees,
  limited to one fee per billing cycle
            Compliance for
           February 22, 2010
• Prohibited from increasing the APR on an
  outstanding credit card balance UNLESS:
• Variable Rate Program
• Promotional Rate
• Penalty Rate
• Workout or Hardship Plan

            Compliance for
           February 22, 2010
• Increasing Interest Rates on Future
  Transactions if notice is provided 45 days prior
  to the increase
• Rates cannot be increased for one year after the
  account is opened
• Limit on Subprime Fees (other than late fees,
  overlimit fees, returned payment fees) cannot
  exceed 25% of the amount of the credit limit, if
  fees are taken from the available credit (first
  year of account opening)
                 Compliance for
                February 22, 2010
• Payments in excess of the minimum payment amount must be
  applied to the higher interest rate balances
• Statement Disclosures-
• Date on which payment is due or the date on which a late
  payment fee will be imposed
• Amount of the Late Payment fee
• Penalty Rate-Notice of the fact of the Penalty Rate and the APR
  in proximity of the due date of the payment
• Payoff Timing-Disclose the amount of time required to payoff
  current balance based on minimum payment and current APR
• 36 month Payoff disclosure
• Credit counseling and debt management telephone number
             Compliance for
            February 22, 2010
• Internet website containing Credit Card
  Agreements, FRB central repository establishment
• Prohibits extending credit to consumers under the
  age of 21, unless parent, guardian, spouse or other
  co-signs, accepting responsibility for repayment or
  applicant submits financial information indicating
  an independent means of repaying the debt
• Educational tools for Money Management are
  suggested for consumers under age of 21.

    February 2010 Compliance

• Fall Webinars and updates of requirements
• Communications of Action Plans and timelines
• Tracking of Credit Card Processor changes, testing
  and implementation
• Disclosure and Application Requirements
• FRB Updates as Rules are considered and published

             Compliance for
             August 22, 2010
• Risk Based Increases- accounts must be reviewed
  every 6 months and interest rates decreased if risk
  has declined sufficiently
• Reasonable Penalty Fees- FRB adopt regulations
  establishing standards for determing the amount of
  late payment fees, over limit fees or any other
  penalty fee imposed due to failure to comply with
  the card agreement

           Reg Z Compliance
             July 1, 2010
• Periodic Statements- group all fees together and
  itemize interest charges by transaction type
• Eliminate Effective APR Disclosure
• Revised Applications and solicitations requirements
• Disclose costs, terms and billing rights prior to the
  first transaction occuring or at account opening
• Disclosures required for Checks used to access
  credit card lines
• Disclosures Update in the Fall 2009

•   Contacts:
•   League Compliance Officer
•   Forms, Applications and Disclosure Provider
•   Processor- Data Processor for Open end
    lending changes or LSC for credit card
    processing changes

• Today’s presentation and audio recording will be
  available on August 13 at the League website @
• Questions from today will be assimilated and
  posted on the League website @ by September 1.
• Any questions regarding a specific credit union
  program will be addressed on an individual basis


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