CUNA Comment Letter
CUNA Comments on Proposed Rule Part 706 Unfair or Deceptive Acts or Practices
June 3, 2009
Ms. Mary F. Rupp
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314-3428
|RE:||CUNA Comments on Proposed Rule Part 706 Unfair or Deceptive Acts or Practices|
Dear Ms. Johnson:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the rule issued by the National Credit Union Administration (NCUA) and the other federal financial institution regulators that will amend the unfair or deceptive acts or practices (UDAP) rule. This proposal is comprised primarily of clarifications to the comprehensive UDAP rule that was issued in December 2008. By way of background, CUNA is the largest credit union advocacy organization in this country, representing approximately 90% of our nations 8,000 state and federal credit unions, which serve 92 million members.
Summary of CUNAs Comments
- The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit Card Act) essentially codifies the final rule that was issued last year and supersedes the rule to the extent there are differences among the provisions. We do not have a position at this time as to whether the final rule should be rescinded but are reviewing this issue further.
- It is common for credit unions to make promotional offers to their existing members and they are continuing to assess their operations to determine how the new rules will affect these offers.
- The proposal will define category of transactions as a type or group of transactions in which an annual percentage rate (APR) applies that is different than the APR that applies to other transactions. However, credit unions establish categories based on factors other than the APR.
- When a consumer transfers a credit card account to another account with the same creditors, these rules should not impose a specific time period in which both may be opened in order for this transfer to not be considered an opening of a new account
The Credit Card Act was signed by President Obama shortly before Memorial Day and essentially codifies the UDAP rule that was issued last year and shifts the responsibility for rulemaking to the Federal Reserve Board, since these provisions were codified under the Truth in Lending Act. Provisions of the Credit Card Act must be followed instead of the final rule to the extent there are differences among these prohibitions and restrictions.
This leads to the question as to whether NCUA and the other agencies should now rescind the final rule, as it has for the most part been overridden by the Credit Card Act. Our current view is that it does not matter at this point since the rule is for the most part no longer applicable, but we are currently reviewing the matter further and would appreciate the opportunity to discuss this issue further with NCUA in the near future.
Also, as the only consumer owned cooperatives in the financial marketplace, credit unions have a strong tradition of protecting consumer interests. Consistent with credit unions' history and because credit unions do not generally engage in a number of the practices addressed by the UDAP rule, CUNA was generally supportive of the rule and, again, we do not have a position at this time as to whether the rule should be rescinded, other than that it would have to be amended to conform to the Credit Card Act if it is not rescinded.
As for the current proposal, CUNA generally supports the clarifications and the other changes outlined in the proposed rule. NCUA and the other financial institution regulators have also requested comment on a number of issues in connection with these rules, and CUNA appreciates the opportunity to respond.
The UDAP rule issued last year provides a number of protections for existing credit card balances when the APR or other terms are changed. These protections will apply to outstanding balances that are transferred to another account by the same creditor but not when the account is transferred to a new creditor. In the proposal, NCUA and the other agencies have requested comment as to whether creditors make promotional offers to existing cardholders and how the UDAP rules will affect a creditors ability to continue to make such offers.
It is common for credit unions to make promotional offers to their existing members. However, credit unions are still reviewing their operations as a result of the final rule issued last year so it is unclear at this time as to the extent that these offers will be affected by the new requirements.
The final rule will require creditors to disclose at account-opening the APR that will apply to each category of transactions on a credit card account. The proposal will define category of transactions as a type or group of transactions in which an APR applies that is different than the APR that applies to other transactions. The proposal also requests comment as to whether creditors establish category of transactions based on factors other than the APR.
Credit unions do establish categories of transactions based on other factors. These categories may include purchases, cash advances, and foreign transactions, among others. These are not based on different APRs as the APR may be the same for these categories of transactions.
Under the proposal, when a consumer has a credit card account and opens a new account with the same creditor, the opening of the new credit card constitutes an account-opening if the consumer retains the ability to access credit on both accounts. This means the APR and other terms may not be changed during the first year of the new account.
However, this will not apply if an account is transferred from one credit card to another when there is a brief delay, which means the consumer may access both accounts during this short period of time. NCUA and the other agencies have requested comment as to whether the appropriate time period for such a delay should be 15 days, 30 days, or some other period.
We do not believe the rules should impose a specific time limit for this delay as we can easily envision situations in which there is a required time limit that may then be exceeded for a short period of time due to unforeseen circumstances. For this reason, we oppose a specific time limit and believe these situations should not be considered an account-opening if there are clear indications that the account is being transferred from one credit card to another.
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Thank you for the opportunity to comment on the UDAP proposal. If you have questions about our comments, please contact Senior Vice President and Deputy General Counsel Mary Dunn or me at (202) 638-5777.
Jeffrey P. Bloch
Senior Assistant General Counsel