WASHINGTON -- Consumers should be allowed to opt-out of a credit union's overdraft protection program, but proposed rules requiring extensive notification of this right would be burdensome, CUNA and NAFCU told the Federal Reserve System.

In separate letters, the trade associations said forcing credit unions to go to greater lengths to advise members of their options could hurt smaller credit unions and overwhelm consumers with too much information.

The Federal Reserve has proposed that financial institutions be required to tell consumers that they can opt-out of overdraft protection during any statement period in which the consumer uses the service. Also, the Fed wants financial institutions to give consumers the option of only opting out of overdrafts at ATMs and for debit card transactions.

NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt wrote that the language regarding disclosure requirements is "overly specific and unnecessarily lengthy." She urged the Federal Reserve to do consumer testing to come up with language that results in the information being "presented in a more succinct manner."

CUNA Senior Assistant General Counsel Jeffrey Bloch wrote that if credit unions have to provide the opt-out information as often as the Federal Reserve suggests, it will "increase the risk that consumers will ignore this information, while increasing burdens for financial institutions, which include higher postage and processing costs."

Hunt also objected to the proposal to extend the requirement that financial institutions regularly include on statements aggregate amounts charged for overdrafts and returned checks to all institutions, whether or not they promote or advertise the overdraft protection program.

Institutions should "continue to have the option of mitigating their disclosure obligations by choosing not to promote the payment of overdrafts," she stated.

He praised the part of the regulatory proposal that required financial institutions to only disclose the amount of funds available for a customer's immediate use or withdrawal in their account. Currently, when a customer makes a balance inquiry, the financial institution can include funds available through the overdraft protection plan on top of the amount in the customer's account.

In a separate letter, Hunt took issue with the proposal to change the language on credit card billing statements from the current "grace period" to the phrase "How to Avoid Paying Interest on Purchases." The change will confuse consumers and be costly for credit unions, which would have to spend money to maintain uniformity in their disclosures.

She also said that a proposed change that sets a minimum cutoff hour of at least 5 p.m. for making payments could place a burden on credit unions that are only open for a limit number of hours.

Feds Clarify Disclosure Requirements On Subprime, Adjustable Mortgages

WASHINGTON -- Disclosure forms being given to potential borrowers will more prominently feature the inherent and potential risks of subprime and adjustable-rate mortgage products, as result of regulations issued by NCUA and other federal agencies.

The forms explicitly tell consumers not to assume that they can refinance their ARM at a lower rate.

Also, lenders are required to tell consumers whether monthly payments include taxes and insurance, whether there is a prepayment penalty or balloon payment, and whether obtaining a "full documentation" loan is more cost effective.

The regulations also include sample mortgage comparison forms, which NCUA Chairman JoAnn Johnson said in an accompanying letter to credit unions "are not required disclosures or model forms."

Credit unions can choose whether to use the examples or devise an alternative format that they think is more appropriate for their members, she added.

The final regulations explained the divide among the 25 groups and individuals that issued comments. Most of the trade associations that filed comments on the proposals, which were first drafted last year, said using the model forms should be voluntary for financial institutions. A community organization said the forms should be mandatory to prevent consumer confusion.

The regulations were issued by NCUA, the Office of the Comptroller of the Currency, the Federal Reserve System, the FDIC and the Office of Thrift Supervision.

Wolters Kluwer Offers Tool Kit To Help With Red Flag Compliance

WASHINGTON -- Credit unions seeking help to combat identify theft, as required by federal law, can look to a Red Flag Tool Kit being offered by Wolters Kluwer Financial Services.

The material includes forms, checklists, computer software, instructional videos and an online training course for employees. Credit unions have until Nov. 1 to put together, and inform the Federal Trade Commission of their plans. The FTC has devised Red Flag rules to help credit unions and other financial institutions come up with ways to avoid identity theft of their depositors.

"Not only is it far more cost-effective to purchase the solutions in one package, but the complete Red Flags Tool Kit also provides financial institutions with the essential resources needed to help ensure they are prepared for the Red Flag rules compliance," said Todd Cooper, vice president of Wolters Kluwer's Financial Intelligence Unit.

For additional information, go to: www.wolterskluwerfs.com/redflaginfo.

Financial Industry Solutions OffersWebinars on Business Continuity

WASHINGTON -- Risk assessment and developing a business continuity plan are among the subjects of Webinars being sponsored in the coming weeks by Financial Industry Solutions.

On July 30, the subject will be business impact analysis and risk assessment: foundation of the continuity plan.

On August 6, the topic will be testing and maintaining your plan.

On Aug. 12, the discussion topic is five keys to a successful business continuity plan.

All sessions begin at 1:00 p.m. EDT and last for 45 minutes. The first two sessions are $149 each, and there is no charge for the third session.

To register, contact Randall Smith, the company's senior vice president of business development, at rsmith@fislov.com or go to www.fislov.com.

Financial Industry Solutions is an Indianapolis-based consulting firm that provides companies with business continuity and disaster recovery services.

--cmarx@cutimes.com

NAFCU and Fannie Mae Will Hold Foreclosure Prevention Workshop

WASHINGTON -- With foreclosures rising to record levels, credit unions can learn some tools for helping members avoid losing their homes at a seminar sponsored by NAFCU in conjunction with Fannie Mae.

The two-hour session, "Credit Union Foreclosure Prevention Strategies," is scheduled to be held in the Chicago offices of Fannie Mae on Aug. 6.

Fannie Mae's Affinity Relationship Manager Tammy Trefny will discuss the state of the housing market and explain what declining home values are doing to increase foreclosure projections. She will also give advice on how credit unions can position themselves to help keep members in their homes. Trefny has over 19 years of experience in the mortgage industry, 12 of which were spent in the primary mortgage market.

NAFCU Senior Vice President of Communications Jay Morris will moderate the event.

All credit unions are invited to attend the regional meeting and can register by calling 800-344-5580. NAFCU members can also register online at www.nafcu.org/ChicagoRegional.

Instant Insights /

Trade Associations Take Issue With Federal Reserve Overdraft Rules

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