Overdraft Charges Should Not Be Covered by Reg Z, NAFCU Says

ARLINGTON, Va.-NAFCU objected to some key provisions to the Federal Reserve Board’s recent proposed revision to the official staff commentary of Regulation Z, implementing the Truth in Lending Act. In its official comment letter, NAFCU argued that Reg Z should not cover overdraft protection, as the Fed proposed. “Consumers ultimately benefit from bounce protection services because they can avoid additional charges by payees for returned checks and possible late payments.Subjecting bounce protection service programs to Regulation Z disclosure requirements will effectively eliminate such programs because financial institutions will find compliance burdensome and impractical,” the letter signed by NAFCU President and CEO Fred Becker read. Additionally, NAFCU did not support the proposal that an expedited payment fee should be disclosed under Reg Z because it is more closely related to a checking account than a credit account since the fee is actually debited from the checking account. “Unlike a late fee, which is added to the line of credit, the expedited payment fee does not affect the actual credit plan and should not be considered a significant part of the credit process,” according to the trade group’s comment letter. NAFCU also disagreed with the elimination of the option to use actual auction results and, instead, mandate statistical data to compare to compare with the APR of the loan. The association did back recommendations that Reg Z’s staff commentary not require disclosure of expedited delivery fees or a change in terms notice. NAFCU also wrote that credit card issuers should be permitted to replace a credit card with more than one so long as the consumers’ unauthorized use liability does not increase and that the Fed should provide additional guidance on mortgage insurance premium disclosure, as recommended.