Fed Approves Reg Z Changes

LOANLINER Compliance to Reg Z 

Find continually updated information regarding language surrounding the new Regulation Z, released by the Federal Reserve Board on December 18, 2008. CUNA Mutual Group's team of experts continues to analyze the new rules to ensure you will have the most in-depth information possible. Stay tuned to learn how these changes will affect your credit card and multi-featured, open-end lending programs.

July 22, 2009
Weekly Calls Scheduled for MFOEL Questions and Answers

To provide you an opportunity to call in to LOANLINER’s compliance experts and ask your questions related to multi-featured, open-end lending, a series of weekly calls has been scheduled based on pertinent topics to Regulation Z changes.

Each call will be held at 2 p.m. CST and will be 60 minutes in duration. A presenter will begin the call with a short discussion based on the scheduled topic and then open it up for questions and answers. Mark your calendars for below schedule.

 Date

 Opening Subject

 Call Information

 Wed July 15th

 Plan Opening

 877.418.3422, ID 18982470

 Wed July 20th

 Making Informed Credit Decisions

 877.418.3422, ID 18984410

 Wed July 22th

 Advance Requests

 877.418.3422, ID 18984666

 Wed July 27th

 Plan Opening

 877.418.3422, ID 18984908

 Wed July 29th

 Making Informed Credit Decisions

 877.418.3422, ID 18985046

July 6, 2009
CUNA Mutual's Reg Z Open-end Lending Analysis Complete

CUNA Mutual Group's Legal and LOANLINER Documents divisions announce today their analysis of amendments to Regulation Z, the enabling legislation to the Truth in Lending Act and issued by the Federal Reserve Board on December 18, 2008, is ready for credit union use.

This in-depth information will help you during your review of your multi-featured, open-end lending (MFOEL) program before the compliance date of July 1, 2010.

The good news is the regulation's new language keeps multi-featured, open-end lending a viable alternative for credit unions. While some changes may have to be made to your policies and procedures, the benefits of offering open-end lending are still valid. Benefits you most likely sought out when implementing MFOEL, such as allowing your members easy access to your lending products without having to visit a branch and more efficiently and with greater cost effectiveness closing more loans.

As a summary, a good way to think about changes to MFOEL plans is to remember the "Big Five":

1.                  Open-end lending and closed-end transactions are different.

2.                  Open-end lending connotes that the borrower and credit union intend to have a long-term relationship.

3.                  There is a significant distinction between an initial account application and a subsequent advance request.

4.                  Credit unions need to establish clear policies and/or procedures that identify what transactions by class will cause            additional verification for a subsequent advance.

5.                  Verification processes are designed to be only sufficient to verify the ongoing creditworthiness of the member.

To help you in your analysis, we've created a series of tools for you and your team to use, including:

 

Compliance, A Journal for Credit Unions Spring 2009 edition*

Special edition of the Journal released to credit unions in March 2009.

Compliance, A Journal for Credit Unions Summer 2009 edition*

Super sized edition of the Journal not even off the presses yet.

MFOEL At A Glance

A high-level overview of MFOEL with the changes to Reg Z incorporated.

MFOEL Verification Matrix

A tool to assist you in analyzing and determining your policies and procedures on verifying borrower data for advance requests. This tool will help you make informed credit decisions when processing advance requests, pricing and approving or denying advance requests within the new scope of Reg Z. Use this tool with the workbook listed below.

 
MFOEL Documents

Loan documents to be used within the new framework of the regulation.

MFOEL FAQs

Frequently asked questions we’ve received from credit unions and our employees, and the answers.

Moving from Open End Lending to Closed End Lending…Things to Consider

An overview of the implications you’ll want to consider in making your evaluation and ultimate business decision to continue using MFOEL or move to another lending platform such as closed-end.

MFOEL and Reg Z – A Workbook for Credit Unions

A guide to use in assessing how the new language in Reg Z may impact your lending programs. It’s designed to assist you in comparing your policies, procedures, and documents current-state vs. after complying with the new language. Upon completion, you should be able to understand where adjustments to policies, procedures and documents are needed to carry out MFOEL in the future.

*Please note: If you're a Compliance Journal subscriber, your subscription will be extended for two additional issues. Printed copies of the Compliance Journal will be mailed on July 16.


You'll find these tools in our Lending Resource Center. Simply sign on and follow the link from the graphic in the right column. If you've never signed on before, click the "Register for New User ID" button. You'll be asked to provide some information about you and your credit union, and receive a follow-up e-mail after we set up your user account.

We've also created a series of training tools to help you in your research. To find out more about our Reg Z webinars, go to the Learning page and scroll down to find the Reg Z information.

The compliance date may seem a long ways away, but there's work to be done. Get your team together to review these tools and attend a webinar at your earliest convenience. We know it's a lot to digest. That's why we're providing this information to you now.

Keep in mind that this information focuses exclusively on regulatory changes and impact to MFOEL. There are also regulatory impacts to credit card products.  This Fall, we will be distributing information on regulatory impacts to credit cards, including similar tools and training opportunities.

LL-0609-2D0C

June 5, 2009
Reg Z Project Nearing Launch to Marketplace

Following months of review, legal determination and development work, CUNA Mutual’s Regulation Z project team announces that, beginning July 2, it will be conducting a widespread communication effort to all customers using LOANLINER multi-featured, open-end lending (MFOEL) documents. The time we’ve taken to create our response has given us the opportunity to bring a cohesive, effective and repeatable process to our customers.

Credit Union Communication Schedule

To ensure our customers are well cared for during the implementation of any new processes and procedures needed to comply with the July 1, 2010 deadline, on July 2, we will begin a wave of communications to communicate CUNA Mutual’s guidance to the regulation and provide various suggestions from which you may choose to use to continue offering multi-featured, open-end lending and remain in compliance.

A set of written communication waves is scheduled for all LOANLINER customers. The project team chose to communicate to credit unions on a state by state basis for several reasons: (1) we know credit union executives discuss with their local peers important issues in the industry and wanted to ensure you and your peers would be working from the same information; (2) to not over-burden the operations system in our home office and be able to provide you the best possible service; (3) to maintain a steady stream of participants in the educational system and have sessions available when you want to be trained; and, (4) to ensure a balance of activity across our sales force so we’re ready when you are. A letter will be sent via regular posted mail distributed as follows:

·                     July 9:  CT, DE, FL, IL, MO, NC, OK, RI, VT, WV, AZ, CO, ID, WA, AK (725 CUs)

·                     July 16:  AR, GA, IN, MN, MS, NH, NJ, ND, PA, SC, VA, MT, UT, HI (724 CUs)

·                     July 23:  AL, DC, IA, KY, LA, MA, NY, WI, CA, NV, WY (725 CUs)

·                     July 30:  KA, ME, MD, MI, NE, OH, SD, TN, TX, NM, OR (751 CUs)

All segments will receive information on how to link to the tool kit (which, for security purposes, will be placed behind single sign-on). Tool kit items will include:

·                     YouTube Presentation will Bill Klewin and Mike Long, Chief Lending Officer at UW Credit Union

·                     Pre-recorded FAQ’s with Bill Klewin

·                     April Compliance Journal

·                     July Compliance Journal

·                     Verification Matrix

·                     Document changes job aid

·                     FAQs

·                     Things to consider if moving from open-end lending to closed-end lending

Subsequent Activities

Following initial communications, webinars will be held twice weekly well into October. Additionally, a weekly call-in Q&A with subject matter experts will be conducted. The schedule for these weekly telephone calls will be posted at this site. Credit union callers will be directed to dial 800.356.5012, option 2. A group of subject matter experts will be on hand during normal business hours to answer specific questions to Regulation Z matters.

Credit Card Changes

Additionally, Regulation Z made substantive changes to credit card lending and operations. The training teams, as well as LOANLINER operations is working diligently on preparing educational events and document changes that will allow credit unions to comply by the deadline. The team has chosen MFOEL to be the first focus as it will take the most time to work through policy and procedures to determine whether a credit union maintains its open-end programs or moves to closed-end.

If you have questions about this information, you can submit them via the "Ask the Experts" button at the top right of this page, or call our hotline at 800.356.5012, option 2.

May 11, 2009
The Main Components of Open-End Lending will be Preserved Says UWCU's Long

Mike Long, Chief Credit Officer at UW Credit Union and CUNA Mutual's Bill Klewin, Associate General Counsel, take to YouTube to further explain open-end lending functionality relating to Regulation Z changes initiated by the Federal Reserve Board on December 18.

"Ultimately, the main components of open-end lending will be preserved and we'll adapt to some of the change we'll have to make," says Long.

 

 

Previous Regulation Z Postings

April 1, 2009
FRB Refers Credit Unions to CUNA Mutual Group for Open-end Lending Guidance

Today, during a National Association of Federal Credit Unions (NAFCU) webinar detailing recently enacted changes to Regulation Z, Federal Reserve Board (FRB) Senior Attorney Amy Burke suggested credit unions using multi-featured, open-end lending work with CUNA Mutual Group’s LOANLINER to ensure compliance by the July 1, 2010 deadline.

When asked by a webinar participant if multi-featured, open-end (MFOE) lending is still a viable alternative for credit unions, Burke responded, “It’s a business decision.”

“We couldn’t agree more with Burke’s answer,” states Bill Klewin, Associate General Counsel for CUNA Mutual Group.  “Given the changes, CUNA Mutual still considers multi-featured, open-end lending an appropriate method for credit unions to make loans.”

Several participants raised questions regarding LOANLINER’s multi-featured, open-end lending solution during the webinar as well. CUNA Mutual has been reviewing the changes to the regulations and believes credit unions will have to review their lending processes and may have to amend their processes to comply with the commentary, including:

Product:

·                     Establish a self-replenishing line of credit feature

·                     Ensure documents support open-end process 

Policy:

·                     Ensure policies support limited circumstances for verification and when advances can be denied 

Procedures:

·                     Ensure staff is trained on open-end concepts

·                     Ensure data processing and other systems support policies and product

“LOANLINER is making great headway in developing in-depth implementation guides and training to support multi-featured, open-end lending as a result of the regulation change,” says Klewin. “Our summer edition of Compliance – A Journal for Credit Unions will be devoted to providing Regulation Z assistance for credit unions.”

In advance of the developing training and the summer issue of the Journal that will be available in early July, credit unions with questions regarding MFOE should contact LOANLINER’s Reg Z Hotline at 800.356.5012, option 3.


February 24, 2009
CUNA Mutual’s Klewin Explains Multi-Featured, Open-End Lending at GAC

WASHINGTON– Changes to Regulation Z, recently issued by the Federal Reserve Board, mean changes to the way credit unions conduct their lending business. The amended regulatory language and how it affects lending procedures was explained Tuesday by CUNA Mutual Group Associate Counsel William Klewin during a regulatory panel discussion at CUNA’s annual Governmental Affairs Conference.

The regulatory changes specifically affect multi-featured; open-end lending, a practice used for nearly 30 years, which allows credit unions to have a single lending contract with a member covering multiple lending products. Under this plan, the member can have multiple sub-accounts with different program features and rate structures.

“Some features of the program might be used repeatedly, like an overdraft line, while others might be used infrequently, such as the part of the credit line available for secured credit,” said Klewin. “On the other hand, if the program as a whole is subject to prescribed terms and otherwise meets the definition of open-end credit, the program would be considered a single, multi-featured plan.”

Because regulatory observers feared a change that would negatively impact multi-featured, open-end lending practices, credit union organizations – including CUNA Mutual – worked to raise awareness of the issue and prepare for potential disruptions to credit unions’ lending practices. Among other efforts, CUNA Mutual met with Federal Reserve Board staff to discuss the issues and propose alternatives, filed comments with the Board and continued to work with credit union organizations and regulators following the comment period.

Klewin said the final rule keeps the multi-featured, open-end lending program intact with the following commentary changes:

·                     Each sub-account is not required to have a self-replenishing credit limit

·                     Language was retained that views the plan as a whole while some features may be used infrequently

·                     Credit unions are permitted to verify information in certain circumstances  to assure continued creditworthiness

“The rule changes require credit unions to review their products, policies and procedures to identify any necessary changes as a result of the new regulations,” Klewin said. He further suggested the affected credit unions work closely with their data processing and loan origination system providers to support any needed changes.

New Reg Z Makes Substantive Changes to Credit Card Lending

January 7, 2009

On December 18, the FRB staff published changes to Regulation Z affecting credit cards and multi-featured open-end lending. These rules, numbering over 1,000 pages of regulation, deeply overhaul credit card disclosure requirements. The rules require changes to the timing and contents of the “Schumer Box”, which sets forth the terms and conditions of a credit card account, adds a “Schumer Box” type of disclosure to the initial Truth in Lending disclosures, and substantially alters the periodic statement disclosure requirements. Credit unions must comply with these new rules by July 1, 2010. The changes to the periodic statements for credit cards and other open-end lending plans will require card processors to change their processes.

CUNA Mutual's team of regulatory and compliance experts provides a summary  (168 KB/4 pages) of new Regulation Z requirements pertaining to credit card accounts. Our team of legal experts will continue to evaluate the language of the new regulation to provide additional, in-depth information to our credit union customers.

Any changes to LOANLINER documentation as a result of the new regulation will be completed well in advance of the final compliance date. Credit union lending and documentation experts should contact credit card processors and issuers to ensure they will be in compliance by the date.

December 23, 2008
CUNA Mutual Group Reacts to New Regulation Z

On December 18, the Federal Reserve Board (FRB) finalized rules pertaining to consumer lending addressed in Regulation Z, the implementing legislation for Truth in Lending. CUNA Mutual Group, in conjunction with CUNA, NAFCU, and other consumer organizations, worked diligently for nearly two years to convey the negative consumer impact and financial implications for credit unions as the FRB addressed open-end lending, including multi-featured, open-end (MFOE) plans and credit card programs. The NCUA and NASCUS also weighed in with their concerns.

“We brought our message to the FRB on behalf of credit unions to ensure they had a voice during the FRB’s deliberations,” said Kevin Lentz, Senior Vice President of Services Products at CUNA Mutual Group. “While the FRB made several changes to multi-featured, open-end lending programs, we believe that the intrinsic value of this efficient and effective lending instrument has on the consumer credit marketplace is preserved. Multi-featured, open-end lending is alive and well.”

In addition to efforts with the FRB, CUNA Mutual’s advocacy included:

1.                  Conducting a survey of credit unions to collect the costs they would incur to comply with the proposed regulation. CUNA Mutual also collected other substantive information and was not able to identify any consumer complaints regarding the disclosure of the loan terms under a multi-featured open-end lending plan.

2.                  Hiring an outside firm to perform an objective assessment with more than 1,000 respondents of the impact to the member in terms of clarity of disclosure and ease of completing the lending transaction.

3.                  Working with a task force of credit union lending and operational experts to develop an alternative proposal that focused on accomplishing the FRB’s objective to improve disclosures while maintaining the efficiency and convenience of MFOE lending. While the alternative approach was not embraced by the FRB, it showed our determination to find solutions for credit unions.

4.                  Engaging CUNA, NAFCU and consumer groups to contribute commentary on behalf of credit unions. Many credit unions answered the call and submitted more than 300 comment letters to the FRB.

5.                  Meeting with FRB attorneys on three occasions to convey concerns and negative consumer impact. Credit union experts joined us in these meetings in order to provide first-hand knowledge of lending practices.

6.                  Jeff Post, President and CEO of CUNA Mutual Group, met separately with a representative of the FRB in Washington, D.C. to provide information on the ramifications to consumer lending.

“The work we’ve done on behalf of credit unions to date is just the beginning,” said Lentz. “Now that the rules have been finalized, we’ll perform extensive analyses to determine the depth and breadth of how the new legislation will affect credit unions, their lending practices and the technology partners that serve their lending needs. The changes brought about by the new rules also give us the opportunity to circle our efforts on building the next generation of lending for our credit union customers.”

The most current information will be posted right here at www.loanliner.com/regz. Stay tuned for updated information as it becomes available.

 

December 19, 2008
FRB Preserves Multi-featured, Open-end Lending (MFOE)

The Federal Reserve Board (FRB) released final changes to Regulation Z, leaving credit union's ability to offer multi-featured, open-end lending intact. CUNA Mutual Group and CUNA had met several times with the FRB to provide their views regarding the effects of the proposed changes on credit unions.

CUNA Mutual Group acknowledges these changes and will more thoroughly review the FRB’s ruling.

“It sends a strong, positive message that credit unions still have options in using multi-featured open-end lending” said Bill Klewin, associate general counsel for CUNA Mutual Group.

Multi-featured, open-end lending was pioneered by CUNA Mutual Group's LOANLINER nearly 30 years ago, and remains a useful tool for credit unions to establish long-term borrowing relationships with their members. The affirmation of this “sign once, borrow for life” process ensures credit unions’ ability to provide lending convenience to their members.

The new rules preserve multi-featured, open-end lending as a method credit unions use in serving their members. The rules did not change any of the disclosures or timing requirements for making advances under an open-end lending plan. The FRB does not require each subaccount under a plan to have a self-replenishing credit limit. In addition, credit unions are permitted to verify continuing creditworthiness, but may not conduct additional underwriting. We will be providing guidance on the FRB’s modifications. 

The decision is the result of a review of Regulation Z focusing on the rules for open-end and revolving credit accounts not secured by real estate. The effect of today's ruling retains multi-featured, open-end lending as a viable method of making loan advances to members.

Credit unions must comply with the new rules by July 1, 2010. Until then, current lending processes and disclosures may be used.
 

December 19, 2008
New Reg Z Impacts Credit Card Programs

New Regulation Z rules made many changes to credit card lending practices. While the rules are complicated and will require more time to understand all the permutations, our team of regulatory experts shares below some highlights and preliminary effects on credit unions and their lending programs:

1.                  Applications and solicitations: Revised content requirements for "Schumer Box" and adopted new format. LOANLINER will make the required changes.

2.                  Account opening disclosures: Require table similar to, but more specific than, "Schumer Box" changed how charges are disclosed. Rules provide greater clarity for disclosure of fees and charges. LOANLINER will make the required changes.

3.                  Periodic statements: Significant changes to how and what is disclosed. Credit unions will need to work with their credit card processors and statement providers to ensure compliance.

4.                  Change in terms: Extends notice period from 15 to 45 days when terms are changed. If change of terms notice is sent with periodic statement, a tabular format must be used. LOANLINER will create a new document of "tabular format."

5.                  Advertising: Changed required disclosures if triggering terms are used in an advertisement.