Good Day, Students. Well, it is 2010 and many of the laws that pertain to transactional documents are changing. If you are reading this, presumably you have some basic knowledge of the Laws involved, particularly “Reg Z” and the “CARD Act.” However, for those of us a little late to the party, let us start from the beginning. And by “from the beginning,” I refer to, of course, the middle, because some of these laws are already in effect.
So what are we dealing with here? First, we have the regulations under Subpart B of Regulation Z of the Truth in Lending Act (“TILA”). You need to stop and take a drink after just saying the name of the law, let alone what is in the law. As mentioned, some of the law’s requirements have already taken effect. For example, as of August 20, 2009, credit card issuers have been required to mail or otherwise deliver periodic statements at least 21 days before the payment is due. This is a change from the prior law, which only required 14 days. If you are a card issuer (or any issuer of open-ended credit), this is a real kick in the keester as receipt of funds can be delayed a week and the float on that money just disappears.
But let us get back to the documents. If you are part of the production team for these periodic statements, you lost the most important week of your month. The last one. With a week of float lost, lenders will not accept production or delivery delays (not that they were so willing before). So now, customer data, accuracy and document automation is more critical than ever.
Another part of the law that became effective August 2009 requires creditors provide at least 45 days notice of any APR increase or other significant change in terms. Of course, exactly what constitutes a “significant change in terms” is not precisely set forth. What is clear is that with any change, the creditor must inform the customer of their right to cancel the credit facility. Please notice that these laws are all focused on COMMUNICATION. How we communicate with our customers has always been at the heart of TransPromo and now it is more critical than ever. So there it is: a very brief summary of the Reg Z and the CARD Act that are already effective. But we are just getting warmed up.
The next important deadline to note is February 22, 2010. This is when the majority of the Credit Card Accountability and Disclosure Act of 2009 (better known to all of us as the much simpler Credit C.A.R.D. Act, or for our classes, just “the Act”). I always thought it was an amazing coincidence that an act dealing with credit cards would have an acronym of CARD – it’s a testament to the geniuses in Congress! Unfortunately, while it was easy to come up with an abbreviated name, the requirements under the Act do not lend themselves to such simplification
Come February 22, 2010, we will have to deal with laws that are completely reshaping the way we handle transactional documents. Revised Reg Z imposes requirements that are likely to end up adding at least a half page to the average statement. There is mandated language relative to changing rates and fees on existing balances, a requirement that cardholders “opt-in” to over-limit fees (a huge source of revenue for lenders), allocation of payments to the highest APR and a paragraph or two on calculation of the minimum payment.
All of these requirements, and much more, will be discussed in greater detail in future lessons. The key take-away from this should be that these changes present a challenge to those of us who work with documents and regulatory compliance. But there is also a great opportunity here. An opportunity to open a dialog with our customers. An opportunity to take the data we have and use it to create truly personalized statements, unique to every customer. An opportunity to use those individual statements not only to comply with the law, but also to improve our communications with customers.
We must comply with the law. That is not optional. Therefore, we have no alternative but to make changes in our transactional documents. If that is the case (which it is), I suggest that we would be acting foolishly if we did not take advantage of this opportunity and use it to build our brands, build customer loyalty and present customers with all of the options we can provide.
That is all for today. I hope to see you back for the next lesson. In the meantime, please feel free to post any comments or questions so that we can have a n ongoing dialog. In the meantime, feel free to contact me if I can help in any way.
Do Good Things,
John
DISCLAIMER: The contents of this article are general in nature and should not be relied on as legal advice. For legal advice on this subject, contact the author directly or a qualified attorney in your state. © 2010 White Space Marketing, Inc., All Right Reserved