Cutting Through the Confusion About Reg Z and Multi-Featured Credit Plans

ST. PAUL, Minn., May 12 /PRNewswire/ -- Credit unions with multi-featured credit plans are receiving conflicting information about how to handle disclosures for those plans, but Securian nails the essentials in a clearly-written article published this week in Credit Union Times.

"We've been keeping our clients fully and correctly informed about the effects of the Truth In Lending Act and Regulation Z since the rules started going into effect two years ago," said Jackie Philpot, manager, Loan Document Services, Securian Financial Institution Group. "We issue bulletins well in advance of each deadline, explaining the upcoming change and what it means for the way our credit union clients do business."

Securian's latest Reg Z bulletin, written by Cathy Klimek, counsel for Securian Financial Group, is directed at institutions that remain unsure about how to comply with the new rules. Klimek also authored the Credit Union Times article and hosted a webcast on Reg Z that is available here.

Klimek's explanation is clear: The Federal Reserve Board ruled that open-end transactions require open-end disclosures and closed-end transactions require closed-end disclosures. The Fed acknowledges that some multi-feature plans offer both types of credit. It did not ban those plans. Rather, the Fed said credit unions can underwrite closed-end advances and verify creditworthiness for open-end lines of credit as they always have. They simply must provide the appropriate disclosures in the manner and within the time period required by the Fed.

In the bulletin, article and webcast, Klimek also explains:

• The Fed's definition of "consummation" of a loan: It's when a consumer becomes contractually obligated on a credit transaction, usually when the consumer receives or accepts the loan check. Securian's multi-feature plan is not a hybrid approach.
• The Fed's description of the hybrid plan proposal and why it was rejected: It would have provided a mix of open-end and closed-end disclosures for the same advance, up to seven days after consummation.
• Signatures on closed-end disclosures: They are not required but the disclosures must be provided in writing or electronically at or before the time the member receives the loan check.

In the bulletin, Klimek writes that Securian is confident that its approach is compliant under the new rules and several prominent attorneys in the credit union market have advised their clients to that effect. The company also offers letters explaining the continued permissibility of multi-featured plans, "consummation" under closed-end rules, and the hybrid approach that the Fed disallowed. Securian urges credit union officials to share the letters with their compliance officers and legal counsel so that they "can be comfortable with whatever decision you make."

Securian Financial Group has served financial institutions for over 50 years, providing insurance, debt protection, loan documents, and marketing services to more than 4,000 financial institutions across the United States. Since 1880, Securian and its affiliates have provided financial security for individuals and businesses in the form of insurance, investments and retirement plans. Now one of the nation's largest financial services providers, it is the holding company parent of a group of companies that offer a broad range of financial services.

SOURCE Securian Financial Group