Compliance Blog

Posted by Steve Van Beek

NAFCU members the April compliance newsletter is available.  (Member log-in required).  This month's newsletter focuses exclusively on the Unfair or Deceptive Acts or Practices (UDAP) rule and its impact on a FCU's ability to increase consumer credit card APRs after July 1, 2010.  The main article and the Q&As examine the "advance notice exception" for increasing APRs on credit card accounts.  To supplement the newsletter, we also created a UDAP Flowchart - look under "Research Tools" - which uses a detailed example to explore the intricacies of the UDAP rule.  (Member log-in required).

For non-members, here is a sample of one of the Q&As from this month's newsletter:

"Question: The UDAP rules will allow an increased APR to apply to transactions made more than seven days after the 45- day Reg Z advance notice is given. What happens if a transaction is conducted on the seventh day after the notice but is not settled until the eighth day? 

Answer: As your question indicates, the federal credit union can only apply the increased APR to transactions made more than seven days after provision of the advance notice. The agencies have determined the settlement date is the deciding factor in whether a particular transaction was made after the seven day window has expired. Appendix A, Official Staff Commentary to 12 C.F.R. § 706.24(b)(3). In your example, the increased APR could apply to this transaction because it was settled after the seven day window expired. Id. The staff commentary concludes that the “[increased APR] prohibition does not, however, apply to transactions that are authorized within seven days after provision of the 12 C.F.R. [§] 226.9(c) or (g) notice but are settled more than seven days after the notice was provided.” Id. Therefore, because the transaction was not settled until more than seven days from the notice – the increased APR could be charged on the transaction after expiration of the 45-day advance notice period. "

NAFCU will be hosting a webcast on May 6, 2009 (available to NAFCU members and non-members) to discuss the new UDAP and Reg Z rules and how they will impact your credit union's credit card products.  Registration and more information is available here.