The following is an article reprinted with permission from the upcoming Winter 2010 edition of The WWR Letter:
The Credit CARD Technical Corrections Act of 2009: A Victory for Credit Unions
By: Hannah F. G. Singerman, Associate
With much fanfare, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (“Act”) into law on May 22, 2009, responding to the ongoing economic crisis. The Act amends the Truth in Lending Act (“TILA” or “Regulation “Z”) by putting further regulations on lenders to purportedly protect consumers.
Upon reading the Act, credit unions were troubled to notice that some important parts of the Act could cause great unintentional burdens on the credit union industry. Specifically, Section 106(b) of the Act which amended TILA Section 163, required creditors in “open end consumer credit plan[s]” to mail periodic billing statements to the consumer no later than 21 days prior to the payment due date. Compliance with Section 106(b) was required within 90 days after enactment or August 20, 2009.
Based on the plain language, it was unclear whether the section applied only to credit cards or to all open-end consumer credit plans such as home equity lines of credit, signature loans, lines of credit connected with checking accounts and, importantly to the multi-featured, open-end lending programs used by credit unions. If the Act did apply to all such plans, many worried that credit unions would struggle to comply under the short notice and in certain cases, compliance would prove difficult in general.
In response, advocacy groups, such as CUNA, lobbied for clarification. In fact, on July 7, 2009, CUNA itself wrote an official comment letter on the bill. The letter asked for clarification as to what type of loans were implicated by Section 106(b). The CUNA letter also urged, that if all open-end consumer credit plans were intended to be covered by the section, then credit unions should be given additional time to come into compliance. Credit unions themselves were urged to write their own official comments to protect the industry.
CUNA, NCUA and others in the credit union industry met with staffers in Washington to inquire about the purpose of Section 106(b) to learn whether the provision was only intended to regulate credit cards. After the comment period on the Act had ended, the House of Representatives passed the Credit CARD Technical Corrections Act of 2009 on October 13, 2009. The Senate passed the legislation on October 29, 2009 and the bill was signed, with much less fanfare than the original Act, by the President on November 6, 2009. The Credit CARD Technical Corrections Act of 2009 is very short, a mere nine lines of text. However, those nine lines make a big impact since they change the term “open end consumer credit plan” in Section 163(a) of TILA as amended by Section 106(b) of the Act to “a credit card account.” For credit unions, this makes all the difference.
The Credit CARD Technical Corrections Act of 2009 is a happy ending for credit unions and a testament to the hard work of so many in the industry.
Hannah F.G. Singerman is an Associate in the Complex Collections department of the Cleveland office. She can be reached at (216) 685-1162 or firstname.lastname@example.org.