NEWS, EVENTS, PUBLICATIONS & EMERGING ISSUES

SW&M EMERGING ISSUE
August 19, 2009

CREDIT CARD ACT OF 2009 AND PERIODIC STATEMENT DISCLOSURES FOR OPEN END LOANS

Many of our credit union clients have recently consulted our office regarding a provision under the Credit CARD Act of 2009 (the “Act”) that requires creditors to mail or deliver an open end loan’s periodic statement disclosure to borrowers at least 21 days prior to the payment due date disclosed on the periodic statement. Specifically, Section 106 of the Act states a creditor “may not treat a payment on an open end consumer credit plan as late for any purpose, unless the creditor has adopted reasonable procedures designed to ensure that each periodic statement disclosure…is mailed or delivered to the consumer not later than 21 days before the payment due date.” Unlike most of the provisions under the Act, the foregoing provision applies to all open end loans, including HELOCs and personal lines of credit. This requirement takes effect August 20, 2009.

We have been advised that, with respect to non-credit card open end loans, several clients are having difficulty in meeting this requirement due to processing system limitations. The Board of Governors of the Federal Reserve System (the “Board”) addressed this issue in a recent Interim Final Rule, providing a temporary solution for creditors struggling to “update their systems to produce periodic statements by August 20, 2009 that disclose payment due dates and grace period expiration dates (if applicable) that are consistent with the 21-day requirement.” The Board stated that the creditor may remedy this processing issue with respect to non-credit card open end loans by “prominently disclosing on or with the periodic statement that the consumer’s payment will not be treated as late for any purpose if received within 21 days after the statement was mailed or delivered.” As such, if your credit union is having difficulty meeting the 21-day requirement, it may wish to consider this option on a temporary basis until it is able to resolve its periodic statement processing issues. Our office can provide assistance in reviewing or drafting any required disclosure, or with any questions your credit union may have regarding the Act or the Interim Final Rule.

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