PRESS RELEASE

October 16, 2007

NASCUS Provides Comments on Proposed Changes to Regulation Z

ARLINGTON, Va. — NASCUS submitted comments on October 12 regarding the Federal Reserve Board’s (Board) proposed amendments to Regulation Z. The amendments are intended to improve the effectiveness of the disclosures consumers receive in connection with credit card accounts and other revolving credit plans.

NASCUS focused its comments on two areas: open-end credit and consumer protection concerns. Regarding open-end credit, the Board’s comment 2(a)(20)-2 clarifies that while a consumer’s account may contain different sub accounts, each with different minimum payment or other payment options, each sub account must meet the self-replenishing criterion.

NASCUS explains that under the proposal, a consumer would be able to take a further advance without having to obtain separate approval or without separately applying for the funds. From a regulatory perspective, NASCUS does not believe this promotes safety and soundness. Additionally, state credit union regulators believe the revised provision clarifies that a multi-featured, open-end lending program, as it is currently used, may not be truly open-end credit. This may present safety and soundness concerns if the revised provision is enacted.

NASCUS acknowledges that there are costs related to implementing the proposed amendments. However, NASCUS stated that a more robust, multi-featured open-end lending regulation permitting separate underwriting would benefit consumers, credit unions and other financial institutions in the long term.

Additionally, NASCUS addresses consumer protection concerns to the Board. The comment letter notes potential problems with universal defaults and suggests an opt-out provision. While NASCUS regulators believe that universal default provisions are not prevalent in credit union lending products, we believe that universal default provisions are unfriendly to consumers and deserve further review and consideration by the Board.

To view NASCUS’ full comment letter, click here.

Information Contact:
Kate Hartig, Director, Communications and Public Affairs, (703) 528-0669 or kate@nascus.org

The NASCUS mission is to enhance state credit union supervision and advocate a safe and sound state credit union system. Founded in 1965, NASCUS represents all 48 state and territorial credit union supervisors and the NASCUS Credit Union Advisory Council, which is made up of nearly 500 of the nation's more than 3,400 state-chartered credit unions.