Credit CARD Technical Corrections Act of 2009

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 3606) to amend the Truth in Lending Act to make a technical correction to an amendment made by the Credit CARD Act of 2009.

Mr. Speaker, I yield myself such time as I may consume. We made an error, Congress did, when we passed the credit card bill, not in passing the bill. The only error we made there was we didn't make it go into effect immediately because the abusive behavior by the credit card companies has been even worse than some people have feared, and I hope we will soon be trying to move up that effective date. But there was a drafting error in which the restrictions applied not just to credit cards if you read the bill literally, as you have to, with the bill, but all open-end credit agreements. Credit unions in America, which have not been any part of a pattern of abuse of credit cards, were inadvertently swept into this.

The gentleman from Vermont (Mr. Welch) and the gentleman from Missouri (Mr. Skelton) called this to the attention of the committee, as did the National Credit Union Administration and the Credit Union National Association; the latter, of course, being the private association of credit unions, the former being the administrative agency. They asked us to fix it. They were quite correct.

Credit unions are a very important part of the structure of this country and it serves our consumers. And so this bill would correct that error and allow the credit unions to continue to perform their function.

I reserve the balance of my time.

I yield 4 minutes to the gentleman from Vermont, the lead author of this bill, Mr. Welch.

Mr. Speaker, first I would ask unanimous consent that all Members have 5 legislative days in which to revise and extend their remarks and submit extraneous material both on this bill, H.R. 3606, and the preceding bill, H.R. 1327.

Finally, Mr. Speaker, this has been well- covered by the two Members, the gentleman from Vermont (Mr. Welch) and the gentleman from New York (Mr. Lee), who have been major movers in it. I would just ask, although we have general leave, I would note that I am inserting in the Record a letter from the National Credit Union Administration, a letter from the Credit Union National Association, both asking for this, and then two documents which I hope will give people some sense of how this institution works at its best.

Credit Union National Association,

Washington, DC, October 7, 2009.

Hon. Barney Frank,

Chairman, Committee on Financial Services, U.S. House of

Representatives, Washington, DC.

Hon. Spencer Bachus,

Ranking Member, Committee on Financial Services, U.S. House

of Representatives, Washington, DC.

Dear Chairman Frank and Ranking Member Bachus: On behalf of

the Credit Union National Association (CUNA), I am writing

regarding a specific issue that credit unions are

experiencing with respect to the recently-enacted Credit Card

Accountability, Responsibility and Disclosure (CARD) Act.

CUNA is the nation's largest credit union advocacy

organization, representing approximately 90% of America's

8,000 state and federal credit unions and their 92 million

members.

Credit unions are currently reeling from an unintended

consequence of the CARD Act. Section 106 of the CARD Act

prohibits creditors from treating payments as being late

unless the creditor adopts reasonable procedures to ensure

that periodic statements are mailed or delivered to the

consumer no later than 21 days before the payment due date.

We believe this provision was intended to cover only credit

card accounts; however, the provision, as enacted, applies to

all open-end loans, including general lines of credit, lines

of credit associated with share draft and checking accounts,

signature loans, and home equity lines of credit (HELOCs) as

well as multi-featured, open-end lending programs.

Consolidated Billing May Cease, Increasing Costs for Credit Unions

Members

Most credit unions provide monthly consolidated membership

statements that combine information on a member's savings,

checking, and loan accounts, other than for credit cards.

Since these statements may include a number of open-end

credit plans with different due dates, changing these due

dates to comply with the 21-day requirement may lead credit

unions to discontinue the use of consolidated statements or

send statements for each loan in addition to the consolidated

one.

The alternative is to send separate statements for each

loan. This will greatly increase both processing and mailing

costs (in addition to the environmental impact), which credit

unions have estimated will be $1-$2.25 per month per loan.

Notwithstanding the additional costs, we are also very

concerned that some credit unions currently do not have the

capacity to print and mail these increased number of

statements in order to meet the rule's timing requirements.

Not only will credit unions need to pass on these costs to

their members in the form of higher loan rates, lower deposit

rates, or higher fees elsewhere, but credit union members

will be very confused and concerned when they receive

multiple statements from their credit union, depending on how

many loans they have outstanding. Credit union relationships

with their members will suffer, all in an effort to comply

with an unintended application of a law that is intended to

benefit consumers.

Credit Union Members May No Longer Be Able to Choose Their Payment Date

For certain loans, particularly vehicle loans, credit union

members are often permitted to choose the due date to best

suit their financial needs; for example, members may choose

due dates that coincide with pay days or to avoid other

payment due dates. This practice will have to be discontinued

if the member-chosen date no longer complies with the new 21-

day requirement. Changing the express choice by members would

not be consumer-friendly, and members will not understand

that a Federal law requires this action.

Additionally, many credit unions provide their members with

the convenience of automated payments, in which payments are

automatically withdrawn from the credit union account on a

certain date. Again, this may often be chosen by the member,

who may choose a date that is related to when he or she

receives a paycheck. This may now need to be changed based on

the new 21-day requirement, imposing hardship and

inconvenience if the new date no longer coincides with the

receipt of a paycheck.

Bi-Weekly Payments Are No Longer Permitted

Many loans are structured so that payments are made bi-

weekly, which serve to minimize the amount of interest that

is charged, as compared to loans in which payments are made

monthly. These loans are often repaid through payroll

deduction. If bi-weekly programs are no longer permitted

under the new 21-day requirement, the result will be that

these members will pay additional interest and may no longer

have the benefit and convenience of payroll deduction.

HELOC Terms and Conditions Must Be Changed

The 21-day requirement will also apply to HELOCs, the terms

of which cannot be easily changed. Regulation Z lists

exceptions for changing terms of HELOCs and although the

Regulation Z commentary permits changing the due date, we

note that the due date is often a contractual term, which

adds to the difficulty of complying with these new

requirements.

A Technical Correction is Necessary and Appropriate

To address these concerns, Representative Peter Welch (D-

VT) has introduced legislation, H.R. 3606, the CARD Act

Technical Corrections Act. This legislation very simply

inserts the words, ``a credit card account under'' to Section

106 of the CARD Act. These words were included in the House-

passed version of the CARD Act, and we believe the effect of

their omission in the enacted version of the legislation was

unintended. We hope the Committee will agree that a technical

correction is appropriate and will support passage of

technical corrections legislation as quickly as possibly.

On behalf of America's credit unions, thank you very much

for your consideration.

Sincerely,

Daniel A. Mica,

President & CEO.

Mr. Speaker, during the August District Work Period, I traveled extensively throughout Missouri's Fourth Congressional district, meeting with residents who were eager to share their views on a variety of Federal matters. In separate visits with Missouri credit union officials and small town Missouri bankers, the state of the economy and Congress' efforts to make financial services more responsive to every day citizens were top priorities for discussion.

Earlier this year, Congress passed and the President signed into law the Credit Card Accountability, Responsibility, and Disclosure Act, bipartisan legislation to make credit card agreements more customer friendly. I supported this measure and am pleased it has become the law of the land.

But, when I met with credit union officials in August, they brought to my attention a technical error in the law that is making it difficult for them to provide lines of credit to some of their members.

When I returned to Washington in September, I immediately brought the credit unions' concerns to the attention of Financial Services Committee Chairman Barney Frank. And, at the same time, my colleague from Vermont, Congressman Peter Welch, drafted responsible legislation--which we are considering here in the House today--to correct this technical error so that credit unions can continue offering open-end credit plans that are popular with many of their members.

Chairman Frank, Mr. Welch, and their staffs have worked diligently to fix this problem for America's credit unions. I am pleased that they have moved this bill so quickly through the legislative process. I urge my colleagues to support Mr. Welch's legislation and hope the other body will act to pass it soon.

Missouri Credit Union Association,

St. Louis, MO, August 27, 2009.

Hon. Ike Skelton,

Rayburn Building,

Washington, DC.

Dear Representative Skelton: Thank you for taking time out

of your busy schedule to meet with Missouri credit unions

this month in the district. As discussed, Missouri credit

unions are extremely concerned about unintended consequences

created by the Credit Card Accountability, Responsibility and

Disclosure (CARD) Act of 2009, and the serious implications

for consumers in our state. We are asking for your help and

support in a legislative solution.

Credit unions did not participate in the consumer abuses

regarding credit cards that prompted passage of the CARD Act

of 2009, and do not have an issue with complying with the

provisions of the CARD Act that relate specifically to credit

card accounts.

However, sections of the Act applying to open-end credit

plans do affect credit unions and will disadvantage credit

union members. Credit unions, working with their members,

often set up open-end credit plans because of the flexibility

it provides to members in managing their credit and adding

future loans.

It is common for members who live paycheck to paycheck, or

have trouble managing their money, to request a payment plan

that has funds deducted from their checking account or

payroll direct deposit that is credited to their loan. They

may choose to have funds credited weekly, every two weeks, or

twice a month. The CARD Act requirement that the account

holder receive a 21-day notice prior to payment due dates

(Sec. 106(b)) becomes problematic for the credit union when

the member has requested anything other than monthly

payments.

When payment schedules occur more than monthly, we are not

finding a reasonable solution that meets the 21-day notice

requirement of the law. Credit unions report to our

association that there are significant issues with data

processors in complying with the new law. One of Missouri's

smaller credit unions with $19 million in assets has

approximately 1,800 open-end loans that are not credit card

accounts. Making the necessary changes to comply with the Act

will mean additional ongoing expense. There would be

additional costs for multiple mailings including postage and

staff time. If the credit union incurs additional costs to

comply with the CARD Act, those increases will be passed on

to our member consumers. We are also concerned that it will

cause our members considerable confusion if they begin to

receive multiple notices every month. Many credit unions will

be impacted to the extent that they will have to offer only

closed-end loans, which eliminates the convenience and

flexibility that members need and prefer.

If credit unions adjust all open-end credit plans to only

allow one payment per month, we have taken options away from

consumers that help them better manage their money. We

believe that the intent of the CARD Act is to protect

consumers and avoid confusing disclosures and abusive

practices relative to credit card open-end programs. We do

not believe that the intent was to disadvantage members

and increase their costs to access open-end programs.

Section 106(b) is the only place in the Act where the

wording ``open end credit'' is used to broadly apply beyond

credit card programs. During our meeting, we provided you

with suggested language that would correct this

inconsistency. It is provided below. The words in italics are

currently in the bill. The bold wording in brackets is the

suggested replacement.

SEC. 106. Rules regarding periodic statements.

(a) In General.--Section 127 of the Truth in Lending Act

(15 U.S.C. 1637) is amended by adding at the end the

following:

(o) Due Dates for Credit Card Accounts--

(1) In general.--The payment due date for a credit card

account under an open end consumer credit plan shall be the

same day each month.

(2) Weekend or holiday due dates.--If the payment due date

for a credit card account under an open end consumer credit

plan is a day on which the creditor does not receive or

accept payments by mail (including weekends and holidays),

the creditor may not treat a payment received on the next

business day as late for any purpose.

(b) Length of Billing Period.--

(1) In general.--Section 163 of the Truth in Lending Act

Mr. Speaker, I yield myself such time as I may consume.

I rise today in support of H.R. 3606, the Credit CARD Technical Corrections Act of 2009, and appreciate my friend from Vermont (Mr. Welch) for his leadership in bringing this important measure to the floor.

Earlier this year, Congress enacted the Credit Card Accountability, Responsibility, and Disclosure Act in order to provide consumers with more transparency regarding their credit card accounts and protect them from potential predatory practices, including unwarranted rate increases on existing balances and short-cycle billing. One important provision of this new law required that financial institutions deliver credit card statements to customers no later than 21 days before the payment due date.

Unfortunately, between the time when the House passed the CARD Act and when it was signed into law, a change was made to suggest that this new requirement should be applied to all open-ended loan accounts, including home equity lines of credit, rather than just to credit card accounts.

This is especially problematic for credit unions who offer their members monthly consolidated statements covering all loan accounts, the flexibility of determining their payment dates, and the convenience of payroll deductions. Because these services will in many cases violate the new 21-day rule, financial institutions will be forced to discontinue these important benefits to customers.

In addition, if left as-is, the resources needed to comply with these new rules will no doubt force institutions to pass on increased costs to consumers through higher loan fees and interest rates and not to mention the confusion many will face, all from a law that was intended originally for their benefit. This is clearly an unintended consequence that needs to be rectified immediately. The legislation before us right now will correct this and ensure that credit unions and community banks can continue to offer quality service to their members and customers.

As a cosponsor of this important change which will simply ensure that the 21-day requirement only applies to credit card accounts, I urge immediate passage of H.R. 3606.

I reserve the balance of my time.

Mr. Speaker, I have no further requests for time and yield back the balance of my time.

General Leave

I thank the gentleman from Massachusetts (Mr. Frank) and my colleague. I thank the gentleman from New York (Mr. Lee) and Mr. Skelton.

You know, Mr. Speaker, one of the things the American people have a right to expect of us in Congress is that when we pass legislation, we step back after its passage and listen to the people affected by it to see if there are some mistakes that we made that need correction, and in this case, there is a mistake. Mr. Lee just outlined what it is and the chairman did the same.

I think a number of us, including Mr. Skelton, when we were home, heard from our credit card companies as to the over-inclusive nature of the legislation that would adversely affect the good work that they're doing. The CARD Act, as you know, had a number of very good provisions, including the 21-day notice requirement. That's intended to make sure that financial institutions give individuals enough time to pay a bill, and it established a minimum level of fairness. But for credit unions and their members, this change would actually have made things more difficult.

Credit unions use consolidated statements, so home loans, auto loans, savings accounts, checking accounts, and credit card bills are all in one package, and that's for the convenience of the consumer, not to create confusion for the consumer. This is the model, in fact, of how the system should work. It's straightforward and transparent.

The 21-day notice requirement would have had an unintended impact of requiring credit unions to split up those consolidated statements and transform transparency into confusion. This wouldn't help consumers and, obviously, wouldn't add to transparency. So the bill that has the support of Mr. Skelton and Mr. Lee and myself would clarify the intention of the CARD Act and allow credit unions to continue the very commonsense and, I think, consumer-friendly approach of sending their customers a single statement every month.

Mr. President, I ask unanimous consent that the Senate proceed to H.R. 3606.

Mr. President, I ask unanimous consent that the bill be read three times, passed, the motion to reconsider be laid upon the table, with no intervening action or debate, and that any statements relating to the bill be printed in the Record.