WASHINGTON (02/21/05) - Federal
regulators, including NCUA, issued new guidelines Friday
on bounce protection programs that include best practices
for marketing and disclosures and monitoring for safety
and soundness.
The regulators' guidelines include: prominent disclosure
of fees; avoid encouraging poor account management in
order to boost overdraft fees; and providing a clear
explanation of the voluntary nature for the increasingly
popular programs, adopted by hundreds of credit unions
over the past two years.
But a leading consumer advocacy group, the Center for
Responsible Lending, founded by Self-Help CU, criticized
the new guidelines as toothless because the guidelines are
voluntary, and they do not require lenders to disclose the
annual percentage rate on bounce fees, some of which can
amount to 1,000% APR. The group cited a $20-to-$35 bounce
fee applied to an $80 overdraft, which can exceed a 1,400%
rate when a customer takes seven days to pay.
The consumer group has been lobbying federal regulators to
disclose bounce fees as loans, which would require that
the annual rates be disclosed the same way lenders are
required to disclose loan rates. The group urged that
regulators take up more stringent guidelines and adopt
regulations in order to enforce them.
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