How to comply

Complying with the 14-day timing requirement will be more difficult for some credit unions depending on the leniency of their payment options. Whether a credit union currently permits weekly or biweekly payments, or allows payment due dates throughout the month, some of the changes necessary to comply with the 14-day timing requirement will be similar.

Both of the following options will require that the credit union establish one “legal” payment due date for each loan:

• Moving due dates. A credit union that doesn’t offer courtesy periods may move all open-end loan “legal” payment due dates to sometime during the last week (or last third) of the month (for monthly billing cycles) to allow for the 14-day period and the time needed to issue the periodic statement after the end of the month.

Even though one “legal” payment due date is established, a credit union may still permit partial payments on a weekly or bi-weekly basis.

• Daily payment due dates. Credit unions with courtesy periods (that period of time between the actual payment due date and the date a late fee is charged) should be able to permit payment due dates throughout the entire month if the courtesy period is long enough.

Credit unions with shorter courtesy periods will likely have to increase the courtesy period to around 25 days in order to maintain daily payment due dates.

These changes—including establishing “legal” payment due dates, moving the payment due dates to the end of the month, and adding or increasing the courtesy period—are contractual changes that will require an advance notice of change in terms based upon the notice period in your state law.

If no time period is provided, you may provide a 45-day notice as required by Reg Z.

Remember, this requirement becomes effective Oct. 1, 2011. Your credit union’s compliance team should be close to finalizing any changes necessary to comply with the rule.

MICHAEL McLAIN is CUNA’s assistant general counsel and senior compliance counsel. Contact him at 608-231-4185.