Credit Union Trades Request More Time for Overdraft Reg Compliance
ALEXANDRIA, Va.-CUNA and NAFCU were in agreement that credit unions may need more time to comply with NCUA's interim final rule on overdraft disclosures under the Truth in Savings Act. The NCUA Board issued the item for comment Nov. 29, similar to one issued by the Federal Reserve, requiring credit...
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ALEXANDRIA, Va.-CUNA and NAFCU were in agreement that credit unions may need more time to comply with NCUA’s interim final rule on overdraft disclosures under the Truth in Savings Act. The NCUA Board issued the item for comment Nov. 29, similar to one issued by the Federal Reserve, requiring credit unions to provide consumers with additional disclosures (including in advertisements) on overdraft fees and other terms; credit unions advertising the service to disclose fees for the statement period and year-to-date on periodic statements; and guard against ads that mislead consumers on new and existing accounts. Both groups asked that the July 1, 2006 deadline be extended. “We recognize this is the same date that applies to banks and other financial institutions under the Fed’s rule that was issued in May 2005,” CUNA Assistant General Counsel Jeff Bloch wrote. “However, under the Fed’s rule, the July 1, 2006 mandatory compliance date provides those institutions approximately one year to comply from the time that the rule was issued by the Fed.” “We believe credit unions should also have at least one year to comply from the time that NCUA’s rule was issued. A January 1, 2007 required compliance date will provide credit unions with a similar one-year period to prepare for these new regulatory requirements.” Bloch said a number of CUNA’s members were concerned about being able to comply by July 1. NAFCU actually requested a Dec. 31, 2006 compliance deadline. Bloch added that CUNA has significant concern over the cumulative disclosure of overdraft and returned item fees that has been proposed. “While credit unions support reasonable consumer disclosures, a number of credit unions are concerned about the additional burden that will be required to make these changes,” he said. He acknowledged that NCUA’s regulation must be substantially similar to the Federal Reserve’s, but asked NCUA to “review this issue to determine if some flexibility is possible for credit unions to disclose this information in a less burdensome manner or to work with the Fed to provide flexibility for the entire industry.” NAFCU President and CEO Fred Becker pointed to an apparent incongruity in NCUA’s interim final rule. “The preamble also states that the cumulative fees apply to “credit unions that provide ad hoc payments of overdrafts or promote the payment of overdrafts in an advertisement.” (some emphasis added [by NAFCU]). However, under section 707.11 of the interim final rule, these additional periodic statement disclosures are required only “if a credit union promotes the payment of overdrafts in an advertisement.” (emphasis added [by NAFCU]). This discrepancy makes it unclear whether credit unions that provide overdraft protection services but do not promote these services are subject to the cumulative disclosure requirements,” he explained. Becker recommended only credit unions that provide and promote overdraft services be required to state aggregate disclosure requirements. He also pointed out that the “mere mention” of overdraft services in an account agreement is not the promotion of it and should not activate the cumulative disclosure requirements. In a similar vein, the Georgia Credit Union League asked “NCUA provide an exhaustive list of what does and does not constitute `advertising.’” -
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