Compliance Q&A: Open-End Loans

December 3, 2010

Q For open-end loans without a grace period, what’s the minimum amount of time credit unions must provide between the mailing (or delivery) of the periodic statement and the payment due date?

A Fourteen days.  But after Congress passed a Technical Corrections Act for the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in November 2009, everyone was confused.

As credit unions will recall, the Federal Reserve Board said that the CARD Act passed in May 2009 required period statements for all open-end loans be mailed at least 21 days before the due date.

Subscribe to Credit Union MagazineBased on lobbying from CUNA, Congress passed an amendment to the CARD Act a year ago that applies the 21-day requirement only to credit card accounts or to open-end consumer loans that provide a grace period.

But when finalizing its massive open-end Regulation Z amendments and commentary changes at the beginning of 2010, the Fed failed to reinsert the 14-day mailing requirement for open-end loans without a grace period, raising new questions.

In October 2010, the Fed issued 53 pages of more than 30 proposed clarifications of its open-end Truth-in-Lending (TIL) rules, almost all of which will undoubtedly be finalized in early 2011 without major change.

One of these clarifications is that for an open-end loan without a grace period, the creditor must mail or provide the periodic statement at least 14 days prior to the payment due date.

For more on these TIL clarifications, consult CUNA's compliance resources.