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Trades take issue with parts of Fed's proposed disclosure rules


NAFCU President/CEO Fred Becker wrote that the proposed language on credit protection products is “alarmist and potentially misleading’’ and would lead “virtually any consumer not to purchase the product.’’


He took issue with the proposed warning that “If you already have enough insurance or savings…you may not need this product.’’


He also objected to the proposed disclosure that “other types of insurance can give you similar benefits and are often less expensive.’’ Becker wrote that this is misleading because “the differences between credit protection products and term life insurance outweigh their similarities.’’


CUNA Senior Vice President Mary Dunn wrote that discouraging consumers from buying these types of products would hurt credit unions because they “protect them from potential charge-offs and loan losses that may arise in connection with the death, disability or unemployment of members. As a result, such products promote the safety and soundness of credit unions in an important way.’’


Both trades also expressed concern about potential changes to the rules governing Home Equity Lines of Credit.


Becker criticized the proposal to eliminate interest rate floors because doing so increases the creditor’s interest rate risk. This could result in creditors not offering those types of products or cause them to charge a higher up-front rate.


Becker and Dunn both agreed with the proposal to make rescission provisions consistent for HELOCs and closed-end mortgages, but took issue with certain provisions.


Both recommended against mandating that creditors not be required to provide a specific date on which the rescission right terminates. They also recommended that Fed not require that consumers be allowed to send rescission notices to servicers.


The Fed’s proposed changes are to Regulation Z, which implements the Truth in Lending Act.


The comment letters can be read on the Fed's website.