Description
More and more community financial institutions are looking to add in-house credit card programs to their banking product line-up. The reasons are many, including improved customer service and experience, local support, multi-product customer engagement, consumer “wallet share”, increased net interest margin, and interchange income.
Indeed, community banks are getting fed up with referring credit card customers to larger issuers who agree to print the local bank’s logo on their plastic but provide lousy service that falls short of the bank’s high standards. The community bank receives some income, but the bulk of revenue goes to the large issuer. “Why not offer our own custom in-house card?” is a question being asked in Board Rooms and Strategic Planning meetings across the country.
Direct credit card programs are enticing to management but are extremely intimidating to compliance officers… for good reason! There are many regulations involved, but minimal (if any) experience with the specific details of those regs. Compounding the unease, there are little-to-no compliance training presentations to provide understanding and guidance.
Credit card compliance is comprehensive! It isn’t enough to just be up to speed with Reg Z’s open-end rules. Credit card issuers must also be well versed in:
- Reg Z’s special credit card provisions, including:
- Card issuance
- Errors and disputes, including claims for dissatisfaction with goods and services
- Prohibition on right of offset
- Prompt crediting of refunds
- The Credit Card Accountability, Responsibility, and Disclosure Act (Credit CARD Act) provisions, including:
- Advance notice for account changes and consumer’s right to reject changes
- Periodic statement delivery, disclosure, and content requirements
- Payments: minimum amounts, allocation, and cut-offs
- Limitations on certain fees, finance charges, and increases in APR
- Over-the-limits rule
- Ability to Repay requirements
- Special rules for “underage” consumers less than 21 years old
- Application and solicitation requirements
- Differences between credit cards, charge cards, and hybrid prepaid-credit cards
- SCRA and MLA relevance on credit card lending
- FCRA considerations, including:
- Pre-approved offers of credit (prescreening)
- Risk Based Pricing Notices or Credit Score Disclosures
- Adverse Actions
- Reg B and Fair Lending considerations
- Joint owners / Guarantors / Authorized signers
- Decisioning tools
- Adverse Actions
- E-SIGN considerations
- Community Reinvestment Act considerations
- 1071 coverage of business credit cards
- UDAP and card rewards programs
- Oldies but goodies: BSA / OFAC / CIP / COBO
- Duties and responsibilities – crucial!
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