Credit Unions Waiting on Reg Z Disclosures Under New Bankruptcy Law

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WASHINGTON-The Federal Reserve is tasked with developing new disclosures under Regulation Z to accommodate changes made by the new bankruptcy law. But instead of the Oct. 17 deadline that most of the law carries, this provision “is not effective until the Fed promulgates regs, and actually, it’s 12 months after the rules are promulgated,” according to NAFCU Associate Director of Regulatory Affairs Carrie Hunt. Considering the Fed just issued an advance notice of proposed rulemaking earlier this month, credit unions and other lenders have some time to kill before the final regulation becomes effective; there is no deadline. The disclosures cover information on minimum payments for open-end lines of credit, like credit cards and home equity lines of credit. The new Reg Z disclosures will have to be telephonic as well as written. If credit unions customize the information they are offering their members on the requisite toll-free number regarding how long it will take to pay off a debt making only minimum payments, Hunt explained, then they can avoid a lengthy written disclosure. The other option is a longer written disclosure with an example “that may or may not be meaningful to that individual,” she said. A toll-free line is still required but it would provide estimates rather than the exact number of months. The Fed is also required to develop charts to show how long it will take to pay off a debt using minimum payments. However, the regulator is running into difficulties, according to Hunt, because “different institutions have different formulas to calculate minimum payments.” The Fed is also responsible for providing a toll-free line for smaller institutions. NAFCU is looking into a cost estimate of the new disclosures, Hunt said. “The biggest concern is that all the disclosures work together to provide meaningful disclosure.” -

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