CUNA and NAFCU are working with the Federal Reserve to get it to change the provisions of rules on interest rates and notification of customers that will be used to enforce the credit card law passed by Congress last year.
The associations took issue with the Fed's decision to eliminate interest rate floors. NAFCU President/CEO Fred Becker wrote the Fed that interest rate floors are a vital tool to help credit unions manage interest rate risk and are a "vitally important planning tool for credit card issuers."
NAFCU Compliance Director Anthony Demangone predicted credit unions will amend their agreements to get rid of floors but increase the margin used to calculate the rate.
CUNA didn't write a letter to the Fed but expressed its sentiments during several conference calls between Fed staff members and credit union executives.
CUNA Senior Vice President and Deputy General Counsel Mary Mitchell Dunn said credit unions were concerns that the Fed included the change in the final version of the rules but hadn't included it in the draft language sent out for public comment.
CUNA and NAFCU are also objecting to the Fed rules which the associations contend will make it impossible to raise interest rates on existing balances before the rules take effect on Feb. 22. The trades said the rules have the effect of essentially making the law's ban on raising rates effective 45 days before Feb. 22.
"It is frustrating that the board chose to reverse its normal stance on the timing of disclosure requirements. That position would at least be defensible had the board given the industry sufficient time to comply with this change. The timing of the rule, however, made compliance a practical impossibility. Issuers would have had to send out change- in-terms notices by Jan. 7 in order for the disclosures to not be controlled by this new regulation. However, issuers were not made aware of that fact until Jan. 12, when the board announced the final rule. Consequently, the rule has an ex post facto effect for issuers who sent out notices on Jan. 8-11," Becker wrote.
