March 26, 2010

What’s New: Final Reg E Rules on Overdraft Services

Filed under: Compliance,Operations,What's New — Admin User @ 12:47 pm

The final rule will enable consumers to limit the costs of overdraft services by providing consumers a choice regarding their institution’s payment of overdrafts for ATM and one time debit card transactions. Consumers will also be provided a clear disclosure of the fees and terms associated with the institution’s overdraft service.

Opt-In. The final rule requires consumers to opt in, or affirmatively consent, to the institutions’ overdraft service for ATM and one time debit card transactions, before overdraft fees may be assessed on the account. The rule also provides consumers an ongoing right to revoke consent.

Consumers Covered. The opt-in right applies to all consumers, including existing account holders.

Conditioning the Opt-In. The final rule prohibits financial institutions from tying the overdraft payment of overdrafts for check and other transactions to the consumer opting into the overdraft service for ATM and one time debit card transactions.

Same Account Terms, Conditions and Features. The final rule requires institutions to provide consumers who do not opt in with the same account terms, conditions and features, including price, as provided to consumers who do opt in.

Mandatory Compliance Date. The mandatory compliance date is July 1, 2010.

The Gold Book has been updated for these new rules. See Bounce Protection and Reg E notice requirements for additional details and requirements.

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March 24, 2010

Final Rules Restrict Fees, Expiration Dates on Gift Cards

Filed under: Compliance — Admin User @ 7:30 am

The Federal Reserve Board on Tuesday announced final rules to restrict the fees and expiration dates that may apply to gift cards. The rules protect consumers from certain unexpected costs and require that gift card terms and conditions be clearly stated.

The final rules prohibit dormancy, inactivity, and service fees on gift cards unless: (1) the consumer has not used the certificate or card for at least one year; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees. Expiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.

The Board’s rules generally cover retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and network-branded gift cards, which are redeemable at any merchant that accepts the card brand.

The final rules are issued under Regulation E to implement the gift card provisions in the Credit Card Accountability Responsibility and Disclosure Act of 2009.

The final rules are effective August 22, 2010.

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March 16, 2010

U.S. Government to Unveil New $100 Note on April 21

Filed under: Uncategorized — Admin User @ 12:00 pm

The new $100 note design will make its debut on Wednesday, April 21 during a ceremony at the Department of the Treasury’s Cash Room.

The unveiling of the $100 note is the first step in a global multi-government agency public education program implemented by the Department of the Treasury, the Federal Reserve Board and the U.S. Secret Service, to educate those who use the $100 note about its changes before it begins circulating.

To read more, please visit www.newmoney.gov.

March 15, 2010

Board Issues Supervisory Guidance and Regulations on the FFIEC’s Retail Payment Systems Booklet

Filed under: Compliance — Admin User @ 12:00 pm

The Federal Financial Institutions Examination Council (FFIEC) has issued updated guidance for examiners, financial institutions and technology service providers on the risks and risk-management practices applicable to financial institutions’ retail payment systems activities. The guidance, which is included in the FFIEC Information Technology Examination Handbook, is an update to the “Retail Payment Systems Booklet” (Booklet), which was issued in March 2004.

The revised Booklet provides risk identification and management guidance related to the operational impact of The Check Clearing for the 21st Century Act of 2004 (commonly known as the Check 21 Act). It also provides expanded guidance on merchant card processing and automated clearinghouse (ACH) activities, with a more in-depth discussion of the risks posed by these activities and some of the risk-management tools financial institutions can use to mitigate them. There are also brief discussions addressing some of the emerging technologies in retail payment systems, including contactless payment cards, biometrics and proximity payments. The Booklet includes information on remotely created checks and electronically created payment orders, both of which are being used more frequently as payment devices in today’s rapidly evolving payments landscape.

Lastly, the Booklet addresses remote deposit capture activities and provides examination work steps for use in conjunction with the January 14, 2009, FFIEC guidance on “Risk Management of Remote Deposit Capture” (SR letter 09-2).

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March 12, 2010

Check Processing Infrastructure Changes Complete

Filed under: Compliance,Operations — Admin User @ 12:00 pm

The Federal Reserve Banks has completed the reduction in paper check processing infrastructure that was begun in late 2003. With the discontinuation of paper check processing at the Atlanta office on Friday, Feb. 26, 2010, all paper check processing is now handled at the Cleveland office. The Atlanta office serves as the Reserve Banks’ processing location for electronic check processing.

“The movement to a single paper check processing site is recognition of the industry’s success in moving to more efficient electronic solutions for clearing checks,” said Patrick K. Barron, first vice president of the Federal Reserve Bank of Atlanta and Retail Payments Office director. “The changes we have implemented to our paper check infrastructure position us well to continue to meet the needs of the nation’s payments system. At the same time, they have been difficult for our organization as we have been required to reduce our staff.”

Since late 2003, the Reserve Banks have reduced the number of locations where paper checks are processed from 45 offices to a single site in Cleveland. These changes were made in response to the significant rate of adoption of Check 21-enabled services as well as the shift away from the use of paper checks and toward the much greater use of electronic payments.

The implementation of the Check Clearing for the 21st Century Act in October, 2004, significantly reduced the number of check items collected in paper form throughout the industry. At the time Check 21 went into effect, 100 percent of the items processed by the Reserve Banks were in paper form. Today, almost 99 percent are processed as images. As one of the nation’s largest inter-bank processors of electronic check transactions, the Federal Reserve will continue to play an important role in the evolution of the nation’s payments system.

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March 10, 2010

Proposed Rules to Protect Credit Card Users

Filed under: Consumer Lending — Admin User @ 12:38 pm

The Federal Reserve Board has proposed a rule amending Regulation Z (Truth in Lending) to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider increases in interest rates.

Among other things, the proposed rule would:

  • Prohibit credit card issuers from charging penalty fees (including late payment fees and fees for exceeding the credit limit) that exceed the dollar amount associated with the consumer’s violation of the account terms. For example, card issuers would no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee could not exceed $20.
  • Ban inactivity fees, such as fees based on the consumer’s failure to use the account to make new purchases.
  • Prevent issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
  • Require credit card issuers to inform consumers of the reasons for increases in rates.
  • Require issuers that have increased rates since January 1, 2009, to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.

The proposed rule represents the third stage of the Federal Reserve’s implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act), which was enacted in May 2009. The provisions of the Credit Card Act addressed in this proposal will go into effect on August 22, 2010. In July 2009, the Board issued a rule implementing the provisions of the Credit Card Act that went into effect on August 20, 2009. In January 2010, the Board issued a rule to implement the provisions of the Credit Card Act that went into effect on February 22, 2010.

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Online Consumer Guide to Credit Cards

Filed under: Compliance,Consumer Lending — Admin User @ 12:00 pm

The Federal Reserve Board launched a new interactive website to help consumers better understand the new credit card protections that will took effect on February 22. These rules ban several harmful practices and require greater transparency in the disclosure of the terms and conditions of credit card accounts.

The site, which can be found at www.federalreserve.gov/creditcard, summarizes the main provisions of the rules and explains how they will affect credit card users. Two interactive features will allow consumers to learn more about the terms and fees of credit card offers and about the new features of their monthly statements.

Information about recent changes in credit card rules forms the core of the site, but basic facts about common credit card options, interest rates, and fees are also provided. Consumers will find a glossary of common credit card terms for quick reference. A list of federal credit protection laws provides a basic guide for those who want to learn more about their rights.

The site also provides information about common credit card problems–such as lost or stolen cards–and links to resources for consumers who are experiencing problems with their accounts.

Some of the material on the site, such as the “5-Tips” publications, is available in Spanish. The Board will continue to build the site during the coming months to include additional credit card information, features, and Spanish translations.

The web address for the Federal Reserve’s guide to credit cards will appear on the solicitations consumers receive from credit card issuers.

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March 9, 2010

Regulators Issue Statement on Lending to Creditworthy Small Businesses

Filed under: Commercial Lending — Admin User @ 3:20 pm

The federal financial regulatory agencies and the Conference of State Bank Supervisors (the regulators) issued a statement today on prudent lending to creditworthy small business borrowers.  The regulators recognize that small businesses play an important role in the economy and know that some are experiencing difficulty in obtaining or renewing credit.

The statement emphasizes that financial institutions that engage in prudent small business lending after performing a comprehensive review of a borrower’s financial condition will not be subject to supervisory criticism for small business loans made on that basis. Financial institutions should understand the long-term viability of the borrower’s business and focus on the strength of a borrowers’ business plan to manage risk rather than using portfolio management models that rely primarily on general inputs, such as a borrower’s geographic location or industry.

The regulators are working with the industry and supervisory staff to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to sound small business borrowers.

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