Under a multi-featured, open-end lending plan, a member has one account with various features or sub-accounts. CUNA Senior Assistant General Counsel Jeff Bloch said the organization strongly opposed the proposed changes "that would severely curtail the ability" to offer these. Current Staff Commentary permits such plans if it is "self-replenishing," meaning the member can borrow under a sub-account, repay the loan, and borrow again under a different sub-account. The proposal would require that each sub-account be self-replenishing.

This change would "jeopardize the continued existence of these plans in their current form, which are widely used within the credit union system" and the Fed has not demonstrated a need for a change in the policy.

NAFCU noted the substantial costs of the change including compliance, re-training, form and disclosure modifications, IT system enhancements, software reprogramming, and additional staff for extra paperwork and branch traffic.

From a safety and soundness perspective, NASCUS explained that under the proposal, a consumer would be able to take a further advance without having to obtain separate approval or without separately applying for the funds. The state regulator representative said that it does not believe this promotes safety and soundness. Additionally, state credit union regulators believe the revised provision clarifies that a multi-featured, open-end lending program, as it is currently used, may not be truly open-end credit. This too may present safety and soundness concerns if the revised provision is enacted.

CUNA suggested that only closed-end disclosures be provided for credit that is not self-replenishing so a signature is not required each time a member receives credit under the plan. The trade associations also recommended that implementation be postponed until the Fed completes its review of Reg Z.

CUNA and NAFCU also encouraged the elimination of the "effective APR." NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt wrote, "We believe that most consumers do not understand the effective APR and do not find this disclosure useful. Moreover, while the disclosure of the effective APR may be helpful in discerning the cost of credit for that particular billing cycle, it is uncertain whether the effective APR gives the consumer an accurate depiction of the cost of credit over more than one cycle."

Considering all transaction fees under the APR, which would likely push credit unions over the 18% interest rate cap. "The effective APR can also be misleading. One-time fees can result in a much higher APR for one statement period than for others in which these one-time fees are not incurred," CUNA's letter read. "This is not only confusing, but is inaccurate because the APR is a calculation that assumes the interest and fees included in the APR are charged continuously throughout the annual period." These items are better expressed in dollars.

The Bankruptcy Abuse Prevention and Consumer Protection Act required disclosures of the impact of making minimum payments on credit card accounts. Under the law, the Fed is required to provide model disclosures, included in this proposal, including a warning statement that making only minimum payments will increase the dollar amount of interest paid; a hypothetical example; and a toll-free number consumers can call for an estimate of how long it will take to repay their actual account balance if only minimum payments are made. CUNA's Bloch wrote, "We believe these disclosures should generally be limited to credit cards in which the consumer has an option to vary the payments that are made. This would exclude certain types of charge cards in which the consumer is obligated to pay the balance in full each month, as well as all other plans in which there are fixed payments that amortize the loan over a certain period of time."

NAFCU's letter pointed out, "However, to encourage credit card issuers to provide disclosures of actual repayment estimates on periodic statements, the proposal provides that if card issuers do so, they need not disclose the warning, the hypothetical example, and a toll-free number on the periodic statement (nor need they maintain a toll-free number for the actual repayment disclosure).

"NAFCU is strongly supportive of this alternative. Although disclosures of actual repayment estimates on periodic statements would require significant system modifications and considerable upfront and ongoing implementation costs, NAFCU believes that the availability of this option will help to mitigate the significant compliance burden…"

NAFCU advocated for an implementation period of at least 18 months, while CUNA recommended two years.

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