May 31, 2007

• Whether the voluntary nature of the Model Form is sufficiently clear—particularly in light of the rescission of the sample clauses.
  
• Whether the Model Form enables an institution to describe its privacy policy accurately.
  
• Whether the array of format requirements is unduly burdensome.
  
• Whether a complex institution can develop and use a single, organization-wide disclosure notice.

Wells Fargo Announces Responsible Education Finance Principles and Marketing Practices
Wells Fargo News Release (05/29/07)

Wells Fargo has published its Responsible Lending Principles and Marketing Practices for Education Financing, publicly unveiling its business policies for student lending. A copy of the publication is accessible online, and includes information about responsible lending practices as well as the company's marketing practices for education finance with its school partners. Wells Fargo has pledged to promote responsible borrowing by encouraging students to consider all education financing options available to them and borrow only what they need, offer attractive financing solutions--which include competitive interest rates and other incentives--and provide consumers with full disclosure about loan options and costs on its Web site. The company also pledged not to enter into revenue-sharing agreements and "school as lender" programs with schools, give items of any value in exchange for special considerations by schools, or compensate lender advisory councils including reimbursement for lodging and travel to meetings. It has further promised not to arrange or agree to provide "opportunity loans," or private loans to borrowers who would not otherwise satisfy Wells Fargo's credit criteria in exchange for additional federally guaranteed loan volume. It will also not provide staff or assist with call center or financial aid office staffing.
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Mastercard Warning on Card Fee Cut
The Australian (05/31/07) P. 23; Jimenez, Katherine

In light of the Reserve Bank of Australia's (RBA's) potential to eliminate interchange fees altogether, Mastercard Australia has announced that a zero interchange policy could result in its termination of card issuance. With backing from the Australian Bankers Association, the RBA is seeking industry input on the proposal set to cut interchange fees for credit cards, eftpos, and debit cards. Mastercard Australia Corporate Affairs Vice President Albert Naffah said, "any move to go down to zero would again be borne entirely by Australian consumers." Naffah added that the RBA has instated a "burden ... on Australian consumers" and that its efforts should be focused on redressing that issue, because lower interchange fees have resulted in the erosion of rewards programs and shorter interest-free terms on cards.
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Card Rules Have Fed, Lawmakers Far Apart
American Banker (05/29/07) Adler, Joe

Though the Federal Reserve Board last week proposed a broad shakeup of disclosures for credit cards, a wide gulf remains between the central bank's plan and more sweeping changes sought by several lawmakers. Under the Fed plan, credit card issuers could continue to use many existing practices that have come under fire on Capitol Hill, including so-called universal default and double-cycle billing, but they would be forced to explain them better. Lawmakers, however, are seeking to ban most of these practices outright. The result is a proposal that industry representatives are already signaling they believe is onerous, while lawmakers dismiss it as not tough enough. The Fed's proposal, issued Wednesday, would require issuers to beef up disclosures on several fronts, including substantial editing of monthly statements and giving customers at least 45 days notice before hiking interest rates or making other changes. Legislation from Rep. Carolyn Maloney (D-N.Y.), the chairman of the House Financial Services Committee's financial institutions subcommittee, meanwhile, would ban fees for certain card payment methods, including electronic funds transfers. A broad bill introduced in March by Reps. Mark Udall (D-Colo.) and Emanuel Cleaver (D-Mo.) would prohibit penalties for on-time payments and over-the-limit fees for approved purchases, among other changes.
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Credit Card Interchange Fees Spark Disputes Among Small Business Merchants
Pittsburgh Tribune-Review (05/27/07) Leonard, Kim

With interchange fees rising, merchants are increasingly putting pressure on state and federal governments to take action on the issue. The Senate Banking, Housing, and Urban Affairs Committee is planning to hold a hearing on interchange practices sometime this year. Meanwhile, the Senate Homeland Security and Government Affairs committee is considering examining the issue as part of a look at alleged abusive practices in the credit card industry. At the state level, legislation has been introduced in nine states to control interchange fees or disclose what the fees are paying for, according to the Merchants Payment Coalition. However, some merchants are not challenging interchange fees because they see them as a necessary business expense. Consumers also appear to be indifferent to the issue of interchange fees. Though a new survey by Javelin Strategy and Research found that most consumers know about interchange fees and believe they affect prices, most say they will not stop using plastic to lower a merchant's costs.
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