21-Day Issue - A Skip Solution?
Posted by Anthony Demangone
I know it is decision time for some of you on the 21-day issue. I just wanted to bring to light a creative solution that a few credit unions are considering. I call it the "skip" solution.
In essence, some credit unions will force a "skip" for their entire open-end portfolio for September.  This would be done via some global change in terms notification that goes to all affected loans. Based on this change, when the credit union issues their August periodic statements in early September, the due dates will be pushed forward a month to October. This way, the members get to keep their existing due dates. The credit union, however, potentially sacrifices an entire month's-worth of payments for their open-end loans. And all subsequent due dates are pushed back. So, when September statements are mailed in early October, a November due date will be shown. And so on.
Technically, this is not really a "skip," as the September payment (and all subsequent payments) are pushed back a month. Will credit unions lose interest income?  I don't think so. At least not when you look at it from an "annual" point of view. In the hypothetical above,  the September payment is pushed to October. Some members will continue to pay as they have. So, nothing is different there. Others will take advantage of this quasi-skip. If interest continues to accrue, members will pay the accrued interest in October when they make their next scheduled payment.
This solution seems to be permissible under the Credit CARD Act and interim final rule to Regulation Z.  When and how credit unions would notify members about the change would be a business decision, as long as you follow Reg Z's change in terms requirements. Personally, I lean toward a separate mailing that clearly describes the changes and clearly explains that interest will continue to accrue.Â
In any event, I wanted to pass that along. If you have thoughts or feedback about this possible solution, please leave a comment on the blog.
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On a related note, here's a news story about our continued efforts to turn the 21-day issue around. (Scroll down a little bit.) While the Fed has indicated that they do not intend to budge, we'll keep plugging away.