The Federal Reserve Board (Fed) has issued a proposal that would require additional consumer protections and disclosures for mortgage loans. This is the second phase of the Fed’s review of the mortgage lending rules under Regulation Z, the Truth in Lending Act (TILA).
The parts of the proposed Regulation Z changes that have caused the greatest concern in the credit union industry are the new disclosure rules for credit insurance and debt cancellation. With some of the constrains that have been placed on credit union operations this year such as the opt-in requirements for overdraft programs and the ongoing NCUA assessments, the changes on credit life and debt cancellation will have a negative impact on fee income which has caused concern by many credit unions.
Revising the disclosure rules for credit insurance and debt cancellation and suspension products. This would require the disclosure of the maximum premium or charge per period; the maximum benefit amount, along with a statement that the borrower will be responsible for the balance above the maximum benefit amount; that the cost depends on the balance or interest rate, if applicable; and information about the Fed’s website that provides information about these products. The proposal also includes changes with regard tothe disclosure of eligibility requirements that were proposed last year and the disclosure to the borrower that the product may not be necessary and that the borrower may not receive benefits even if you buy this product. For the eligibility requirements, this would include additional statements as to the time period and age limit for coverage and this would allow lenders to make the eligibility determinations prior to the time of enrollment. These disclosures must be in at least 10-point type size and consistent with the model forms and sample language provided in the proposal. Also, if these disclosures are provided early, the lender must then redisclose the maximum premium or charge per period if this is different at the time of the loan closing
The LSCU would like credit unions to submit comments on the new proposals. The comments are due by December 23, 2010. Please submit comments to the LSCU by December 9, 2010. If commenting directly to the Fed, you must refer to Docket No. R-1390 and use the information below:
Ms. Jennifer J. Johnson
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551 firstname.lastname@example.org
There are a number of ways to get your comments to the LSCU: fax your responses to 850.558.1029; e-mail or call Vice President, Regulatory Affairs
Bill Berg at 866.231.0545 ext. 1028 or Director, Compliance
Scott Morris at ext. 2165. The LSCU also has a
Comment Call section of the website with all of the resources for each comment call.