This memo serves as a summary and recommendation to take a corrective action in adjusting the late fee on both the consumer and business credit card products for Advia Credit Union.
Advia Credit Union (First Community Federal Credit Union) introduced a new consumer credit card program in January 2010. During this period, the Card Act of 2009 was being finalized. Advia Credit Union designed our card program to be compliant with the Card Act requirements, and also prided ourselves in offering a credit card program that was both profitable for the credit union and fair and desirable for the consumer. At the onset of this program, credit card late fees were set at a maximum of $25.
Advia partnered with Ceto & Associates to conduct their Revenue Enhancement Program (REP). Ceto and …show more content…
The Federal Reserve Board’s implementing rule establishes a “safe harbor” benchmark for “reasonable and proportional” penalty fees, which the Board set at $25 for a first violation and $35 for a second violation within the next six months. Late fees also may not exceed the minimum payment due.
Based on the approved language of the Card Act, Advia is not out of compliance but believed it is in the best interest of the membership to do a cost benefit analysis to determine if the fee of $35 is reasonable and proportional to charge for the fee.
Recommendation:
Based on the cost benefit analysis (still in process) Advia’s management believes it is in the best interested of the membership and the card program to return the maximum late fee for both the consumer and business credit card programs to $25. This change does not require a member disclosure, as it does not have an adverse impact the membership. Advia will need to update the service charge schedule, credit card disclosures, and advise The Member’s Group (TMG) to make the
Advia Credit Union (First Community Federal Credit Union) introduced a new consumer credit card program in January 2010. During this period, the Card Act of 2009 was being finalized. Advia Credit Union designed our card program to be compliant with the Card Act requirements, and also prided ourselves in offering a credit card program that was both profitable for the credit union and fair and desirable for the consumer. At the onset of this program, credit card late fees were set at a maximum of $25.
Advia partnered with Ceto & Associates to conduct their Revenue Enhancement Program (REP). Ceto and …show more content…
The Federal Reserve Board’s implementing rule establishes a “safe harbor” benchmark for “reasonable and proportional” penalty fees, which the Board set at $25 for a first violation and $35 for a second violation within the next six months. Late fees also may not exceed the minimum payment due.
Based on the approved language of the Card Act, Advia is not out of compliance but believed it is in the best interest of the membership to do a cost benefit analysis to determine if the fee of $35 is reasonable and proportional to charge for the fee.
Recommendation:
Based on the cost benefit analysis (still in process) Advia’s management believes it is in the best interested of the membership and the card program to return the maximum late fee for both the consumer and business credit card programs to $25. This change does not require a member disclosure, as it does not have an adverse impact the membership. Advia will need to update the service charge schedule, credit card disclosures, and advise The Member’s Group (TMG) to make the