CUNA Comment Letter

Amendments to Regulation DD, the Truth in Savings Act

August 6, 2004

Ms. Jennifer J. Johnson
Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.,
Washington, D.C. 20551

Re:     Docket No. R-1197 – Amendments to Regulation DD, the Truth in Savings Act

Dear Ms. Johnson:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed amendments to Regulation DD, the Truth in Savings Act, on the adequacy of information that is provided to consumers regarding overdraft protection services. CUNA represents approximately 90 percent of our nation’s 9,400 state and federal credit unions.

CUNA generally supports these amendments and is pleased that regulatory changes regarding overdraft protection services are being addressed in Regulation DD, as opposed to Regulation Z, the Truth in Lending Act. The Federal Reserve Board (Fed) had earlier considered changes to Regulation Z and has indicated it may still consider such changes in the future.

We would like to take this opportunity to reiterate our earlier opposition to such changes to Regulation Z, especially any change that would require overdraft fees to be defined as a “finance charge” and calculated as an annual percentage rate. As we explained in our January 27, 2003 comment letter that we submitted to the Fed on this issue, the compliance burden of such a calculation would be very difficult to overcome. Federal credit unions in particular would not likely be able to provide overdraft protection services because the Federal Credit Union Act prohibits loans with interest rates in excess of eighteen percent. Due to the short-term nature of these programs, any reasonable fee would likely exceed eighteen percent.

Regulation DD and the proposed amendments will strengthen the full and fair disclosures that are required under these rules, which CUNA strongly supports. However, there is one concern regarding the Regulation DD amendments that we want to bring to your attention, which is the proposed requirement to provide cumulative disclosures for overdraft and returned item fees for both the statement period and the year-to-date.

A number of credit unions are concerned about the additional burden that will be required to make these changes. Other credit unions, while not expressing direct concerns regarding the burden, have questioned whether their members will review and use the information and also do not understand why this proposal also includes returned item fees, which are not directly related to overdraft protection. Consumers currently receive a significant amount of disclosure information, and we believe the additional cumulative information regarding overdraft and return item fees may actually confuse consumers, without providing significant benefits.

Although credit unions are not directly covered under Regulation DD, the National Credit Union Administration (NCUA) is required to issue substantially similar rules. For this reason, we want to bring these concerns to your attention at this time before NCUA issues its version of these amendments.

If these cumulative disclosures are included in the final version of these amendments, we request that the Fed allow a mandatory compliance date of one year after these amendments are issued. We believe this time period will be necessary, regardless of whether the programming changes are completed in-house or by vendors.

Thank you for the opportunity to comment on the proposed changes to Regulation DD. If you or other Board staff have questions about our comments, please give Associate General Counsel Mary Dunn or me a call at (202) 638-5777.

Sincerely,

Jeffrey Bloch
Assistant General Counsel