July 21, 2011, is a significant date for all credit union compliance staff. Why?
First, it’s the date when the authority for consumer regulations transfers to the Consumer Financial Protection Bureau (CFPB), which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (CU Magazine 3/11, p. 52).
And second, it’s the effective compliance date for some of the provisions of Dodd-Frank and its implementing regulations. This means you might still have work to do this month.
For example, Dodd-Frank requires amendments to Regulation CC to increase the amount of funds available on the next business day. Reg CC provides that for all other checks deposited into a transaction account (other than those that must be available the next business day), $100 of the aggregate amount of those checks must be available the next business day for withdrawal.
Reg CC was amended pursuant to the Dodd-Frank Act to increase that $100 amount to $200. So credit unions must make $200 of the aggregate amount of other checks available on the next business day.
In implementing this Reg CC change by July 21, credit unions must do several things. As with most regulatory changes, you must make staff aware of this requirement and make any necessary changes to your data processing system. You also need to provide a notice to your members.
The notice to members must be “clear and conspicuous,” but isn’t required to be in any certain form. This means you can include the notice in your newsletter or with the periodic statement, so long as it’s clear and conspicuous.
You must provide the notice by Aug. 21, 2011 (you have 30 days after the date of the change to expedite the availability of funds), but you may give it sooner than that if you so choose.
If you choose to send your members a complete new Reg CC disclosure, you must direct your members to the changed terms in the disclosure by providing a letter or insert or by highlighting the changed terms in the disclosure. In short, if you send a new Reg CC disclosure, you need to specifically identify for your member what changed within the disclosure.
Keep in mind that the change in funds availability only applies to transaction accounts, so your change-in-terms notice is only required to be sent to the owners of transaction accounts.
In addition to providing the notice, check to ensure the information related to the amount of funds available (now $200) is updated in your account agreements and account opening disclosures, as well as on your website (if you post funds-availability information on your website), on information posted in your lobby, and at your ATMs.
Also effective July 21 is the requirement to disclose in the risk-based pricing notice the credit score and related information when a credit score is used to make a credit decision.
So, first determine whether you’re using a credit score and providing a risk-based pricing notice. If so, you’ll need to include additional information in your risk-based pricing notice, including the member’s credit score.
You’ll also need to integrate this revised notice into your data processing system, given that it will include the credit score, as well as the factors affecting the credit score.
Additionally, you’ll need to review your policy and procedures regarding who receives the risk-based pricing notice.
Under the current rule, you may give one risk-based pricing notice to multiple consumers if they live at the same address. The new rule requires that each consumer receives a separate notice if the notice includes a credit score.
These are just two of the rules that are effective on July 21. You’ll see many more to come from the CFPB.