CUNA Comment Letter
Docket No. R-1070, Proposed Revisions to Regulation Z on Requirements for Credit and Charge Card Solicitations and Applications
July 18, 2000
Ms. Jennifer J. Johnson
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
Re: Docket No. R-1070, Proposed Revisions to Regulation Z on Requirements for Credit and Charge Card Solicitations and Applications
Dear Ms. Johnson:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed revisions to Regulation Z, which implements the Truth in Lending Act (TILA). The proposed revisions, which appeared in the Federal Register on May 24, 2000, would revise the requirements for credit and charge card solicitations and applications. CUNA represents more than 90 percent of our nation's 10,600 state and federal credit unions.
The proposed revisions to Regulation Z would require the following: 1) the use of 18 point-type size for the Annual Percentage Rate (APR); 2) that creditors provide supplemental information about penalty rates outside of the table commonly referred to as the "Schumer Box;" and 3) that this table be located either on the same page as the solicitation or application reply form, on the first page of any other applicable document, or on a separate insert with a reference to the insert on the application or reply form. In addition, the proposed revisions would suggest that the other disclosures appear in 12 point-type size, although slightly smaller type may be acceptable on a case-by-case basis.
CUNA generally supports the proposed revisions, with some modifications. As member-owned, not-for-profit cooperatives, credit unions strive to provide the highest level of service to help members reach their financial goals. Providing clear and conspicuous disclosures is important to ensure that members receive the products and services that will best meet their needs.
The proposed revisions would further the goal of providing disclosures that are clear and easily understood. A consistent format and style will benefit both credit unions and consumers. The elimination of the current ambiguities in text and style requirements will help consumers to compare similar documents among various financial service providers in order to make informed choices for the products and services that they need.
Although we generally support the proposed rule and other changes that would ensure clear and easily understood disclosures, we would not support future changes that are proposed in order to address problems that arise because certain lenders are not complying with the underlying purpose of the TILA. In these situations, we would encourage the Fed to address these issues directly with the specific lenders. Credit unions and the overwhelming majority of other lenders fully comply with the TILA and Regulation Z and should not be impacted by problems caused by a very small number of other lenders.
Consumers are often charged higher APRs when a specific event occurs, such as a late payment. To help reduce clutter in the Schumer Box, the proposed revisions would require that only the penalty APR would have to be included in the box while additional information, such as the explanation for when the penalty APR applies and how it is calculated, would appear outside the box.
Although we generally agree with the approach of minimizing information in the Schumer Box by eliminating certain information, such as the explanation about when and how the penalty APR applies, we believe there is certain information that is very important and should be easily visible by consumers. Such information includes the penalty APR itself, the fees and APR in connection with balance transfers and cash advances, the grace periods, and the fees for late payments and for exceeding the credit limit.
All of this information is important because different consumers use credit cards for different purposes. Some may be interested in the purchase APR while others may want to take advantage of balance transfers or cash advances and may be more interested in the fees for such services. Having all of this information in one place would benefit all of these consumers because they will be better able to compare among the various lenders the costs of the services that they are specifically interested in.
The Schumer Box is one place where this information would be easily visible. This area draws consumers' attention because they are aware that the Schumer Box contains valuable information. However, in order to minimize the information in the Schumer Box to ensure that the information is presented clearly, a better approach could be to include a statement in the Schumer Box that will clearly indicate that there are other fees and APRs that may apply in certain situations. This statement would also direct the consumer, either with an asterisk or some other means, to this information, which would be either in bold type or clearly marked in some other way.
Under the current Official Staff Commentary, the Schumer Box must be "prominently located." The Fed is proposing revisions to indicate that this requirement will be met if the box is on the same page as the solicitation or application reply form, on the first page of any other applicable document, or on a separate insert if there is a reference to the insert on the application form.
We believe the simpler approach would be to require that the Schumer Box be located on the application reply form. It is also not necessary to clarify that it be on the "same page" as the application form. This may actually cause confusion because there would have to be some clarification as to how the term "same page" applies in a computer context. If this is interpreted to mean "same screen," then this could be problematic because different consumers have different screen sizes that they use with their computer. A consumer with a large screen may be able to view more information on their screen at one time than a consumer with a smaller screen. This problem can be eliminated by removing the term "same page" and simply requiring that the Schumer Box be located on the application reply form. We believe this will place the Schumer Box in the most visible position and should also better protect lenders from consumers who later claim that they did not see the information.
The current proposal would allow the Schumer Box to be located on the first page of any other applicable document. However, we are confused as to the meaning of the term "other applicable document." This confusion would be eliminated by simply requiring that the Schumer Box be located on the application reply form. Otherwise, this term would have to be clarified if it remains in the final rule.
The Fed has also requested additional comment on the need for guidance for applying the type size requirements to disclosures made using electronic communications. With regard to the 12 and 18 point-type size requirements, we must point out that the type size that appears on one computer may appear as a different size when viewed on another computer and that lenders have no control over these computer settings. To resolve this issue, the rule should clarify that the information must or should be "delivered or transmitted" in 12 or 18 point-type size, as opposed to the requirement that it "be" in 12 or 18 point-type size. Lenders should only be responsible for how they transmit the information, not how it appears on the consumer's screen. This should not adversely affect consumers because they will still see that the purchase APR is in significantly bigger type than the other information.
Another approach to consider with regard to electronic communications is to require that the consumer click an icon to indicate that the consumer agrees and accepts the terms of the credit or charge card offer. Under the electronic signature law that was passed last month, consumers should be able to actually "sign" a document online to this effect. For purposes of conformity among lenders and to provide the information as clearly as possible, it may be best to place the Schumer Box right before the icon where the consumer indicates acceptance of the terms of the credit or charge card offer. Again, this will place the Schumer Box in the most visible position and should also better protect lenders from consumers who later claim that they did not see the information.
Thank you for the opportunity to comment on the proposed revisions to Regulation Z. If you or other Board staff have questions about our comments, please give me a call at (202) 218-7795.
Assistant General Counsel