ARLINGTON, Va. – The biggest news on credit card regulation is that the rules governing credit card programs really haven't been updated in many years, according to different sources which track credit cards and their regulation.
"First of all, there really aren't many regulations that deal specifically with credit cards," explained Anthony Demangone, NAFCU director of regulatory compliance, "and there really haven't been any significant regulatory changes that would impact credit union card programs."
Maybe it's the bias of an administration and Congress which is ideologically inclined to look poorly on regulation in general, but observers noted that credit card programs around the country have become something of the wild frontier of the financial services industry, with lots of new practices and procedures on card programs (many of which are unpopular with cardholders), but little or no regulation governing those practices.
For example, even though the ombudsman of the Office of Comptroller of the Currency, Sam Golden, told a recent meeting of the Urban Financial Services Coalition in Dallas, that "nothing ranks higher on the list of consumer irritants year after year than the practices associated with credit-card and related bank products," no regulations governing those practices have been forthcoming. Cardholders object most often to mandatory arbitration clauses, universal default rates (for example, a hike from 15% APR to 32% when a utility bill is paid late), shrinking grace periods and late fees, over-limit fees and balance transfer fees, Golden said. Demangone pointed out that credit unions don't do the sorts of things that tick off cardholders and any likely regulations would probably not touch on CU card programs either. "Federal credit union interest is capped at 18%," he pointed out, "and I don't know of any CUs that use universal default rates."
This is why one of the biggest regulatory changes to affect national issuers, the increase in minimum payments in each cycle from 2% to 4% by regulation, didn't impact credit unions' card programs, Demangone noted.
There will be regulatory changes to CU card programs coming down the pike this year, sources said, as regulations implementing bankruptcy reform are written and put into place. These are likely to include additional disclosures to let cardholders know that if they only pay their minimum card payment each month their debt will take years to pay off.
"I know it's kind of intuitive already" Demangone said, "but I think the regulation may include some sort of graphic requirement to drive the point home to cardholders. But it's hard to say what it might be exactly because the regulation hasn't been written yet, much less come into force." -dmorrison@cutimes.com
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