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CUNA Advocacy Report: June 4

The latest CUNA Advocacy Report is now available and covers:

​By: Bill Cheney, CUNA President/CEO

I met with National Credit Union Administration Board Member Michael Fryzel last week to continue urging regulatory relief. He indicated during our meeting that no new rules are planned, at least for the foreseeable future. Proposals that are already in the pipeline, such as those addressing loan participations and credit union service organizations (CUSOs), will advance but Chairman Debbie Matz has already indicated that those proposals are being revised. The CUSO final rule will be considered this summer; the revisions to the loan participation rule are not as far along.  I focused on major concerns with both pending proposals, which we believe are "regulatory overkill" and urged the agency to drop or change significantly. 

CUNA has urged a more targeted approach for the CUSO rule than exists within the proposal's existing parameters. At the meeting, Fryzel said he wanted to see any future NCUA regulations targeted to address a specific risk or risks and rules should be written in plain English so that credit unions have a clear understanding of their responsibilities.

Fryzel encouraged CUNA and credit unions to weigh in with further ideas for regulatory relief.  He reiterated that credit unions are having a good year and while the NCUA must address any problem areas, it should not interfere with sound credit union operations.

In addition to Fryzel and Cheney, those participating in the meeting were NCUA Senior Policy Advisor Sara Vega, CUNA General Counsel Eric Richard, and CUNA Deputy General Counsel Mary Dunn.

CUNA has filed another comment letter with the CFPB urging the agency to be more proactive in protecting credit unions from further regulations. The letter is due to the CFPB Monday and addresses regulations that the agency has inherited under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Here are some excerpts from the letter.

  • The role of the CFPB in alleviating compliance burdens for institutions that are already heavily regulated is as important as its responsibility to develop and implement regulations for entities that, prior to the establishment of the CFPB, escaped meaningful government oversight.    In light of our members’ views, we feel it is appropriate, as the agency considers meaningful ways to streamline regulations, to reiterate credit unions’ concerns in three major areas: remittance transfers, overdraft protection, and mortgage and mortgage-related regulations.   
  • Since the inception of the CFPB, CUNA has strongly supported the objective of protecting consumers from unscrupulous service providers but credit unions are more concerned than ever that the agency will impose an endless range of new requirements and data collection responsibilities on the most scrupulous service providers in the marketplace:  credit unions.

Last week, CUNA Deputy General Counsel Mary Dunn, Senior Assistant General Counsel Jared Ihrig, and Counsel for Special Projects Kristina Del Vecchio met with Peter Carroll, CFPB Assistant Director of Mortgage Markets, Sean O’Mealia, CFPB Fellow, and Bart Shapiro, of the CFPB’s Office of Community Banks and Credit Unions to urge the bureau to distinguish credit unions, that do not need additional regulations to ensure they will protect consumers, from others in the financial marketplace that engage in abusive practices.

CUNA urged the CFPB to consider that credit unions did not cause the financial crisis and to take this factor into consideration as it moves forward with drafting rules such as the mortgage rules which are required by the Dodd-Frank Act.

The CFPB is empowered to exempt financial service providers from certain regulatory requirements and CUNA called on the agency to work with the credit union system and to invoke that authority as broadly as possible to minimize the impact of these rules on credit unions.  For any rules that credit unions are subject to, CUNA urged the agency to be mindful of the overall impact on credit union mortgage originators and servicers, particularly since a number of credit unions rely on vendors to provide statements and meet other compliance responsibilities.

CUNA also recommended that the agency include an executive summary with every major rulemaking and to spread out the issuance of proposals and stagger the effective and mandatory compliance dates of final rules as much as possible. 

CUNA will continue to follow the CFPB’s mortgage rulemaking efforts very closely and will also continue working with CUNA’s Consumer Protection Subcommittee and Housing Finance Reform Task Force in this regard.

Yesterday, the CFPB issued a press release and announced the re-opening of the comment period surrounding its “ability to repay” mortgage rulemaking, which contains the infamous “qualified mortgage” issue.  The CFPB has recently obtained data from the Federal Housing Finance Agency and other data on privately securitized mortgage loans and is requesting comments relating to this data as it relates to a consumer’s ability to repay a mortgage loan with respect to certain variables such as a borrower’s debt to income ratio and other factors.  The notice can be accessed here, and indicates that the CFPB also seeks comment on additional data and the relationship between a borrower’s ability to repay and other potentially relevant factors such as borrowers’ cash reserves, as well as the potential risks and costs of litigation in connection with the new ability to repay requirements.  Importantly, the notice is focused narrowly on these data issues and does not reopen comment on other aspects of the proposed rule. 

The comment period closes on July 9.  CUNA will be working with its economists as well as CUNA’s Consumer Protection Subcommittee on this issue, and a comment call will be posted soon.

Recently, CUNA has become aware of an increased level of fair lending examinations being conducted by both the CFPB as well as NCUA.  Yesterday, CUNA staff attended a presentation that included panelists from the CFPB and Department of Justice (DOJ) concerning fair lending enforcement and examinations.

The CFPB recently issued a bulletin relating to its stance on disparate impact in April of this year.  Gelford also mentioned that the Dodd-Frank Act requires amendments to Regulations B, C and Z and that the CFPB’s Office of Fair Lending is working very closely with the CFPB’s Office of Research, Markets and Regulations in drafting amendments to each of these rules to comport with these requirements.

According to the CFPB, it is looking at more than just mortgage lending, and its fair lending examinations include reviews of auto lending, credit cards, mortgage servicing, mortgage origination, student loans, and small business lending, as well.  Gelford also mentioned the risk factors that the CFPB takes into consideration when evaluating whether fair lending violations have occurred within an institution:  Discretion, unusual criteria, incentives, reliance on third parties and weak compliance management systems.  The CFPB said it coordinates closely with other Federal enforcement agencies and state regulators including the DOJ, Federal Trade Commission, Department of Housing and Urban Development as well as state attorneys’ general, and also mentioned that the CFPB has independent litigation authority and referral obligations under ECOA.  Finally, the CFPB can also issue civil investigative Demands and maintains administrative hearing authority.  For more information on the CFPB’s rules concerning its investigations, click here.

The DOJ’s efforts surrounding fair lending focus on three primary statutes:  ECOA, Servicemembers’ Civil Relief Act (SCRA), and the Fair Housing Act.  In the last year, DOJ has opened cases involving the following areas:  pricing discrimination, steering, redlining, failure to provide mortgage insurance and SCRA violations.

The CFPB and NCUA both incorporate the FFIEC's Interagency Fair Lending Examination Procedures into their examination processes.  If your credit union is currently undergoing or is notified of an impending fair lending examination, I encourage you and your staff to review these procedures as part of your preparatory efforts for such exams. CUNA will be meeting with NCUA’s Office of Consumer Protection and the CFPB to follow-up on the issue of fair lending in the coming weeks, and we will keep you apprised of any developments that we learn of as a result of these meetings.

Earlier this week, the Board of Trustees of the Financial Accounting Foundation (FAF), which is the entity that oversees the Financial Accounting Standards Board (FASB), released its final report establishing a council tasked with improving standard setting for private companies. This includes credit unions and the new council could have important implications for credit union operations.

The Private Company Council (PCC) will have several primary responsibilities.  It will determine whether exceptions or modifications to existing U.S. Generally Accepted Accounting Principles (GAAP) are necessary to address the needs of users of private company financial statements.   The council will identify  and approve any proposed changes, which would then be reviewed by FASB and subject to public comment before being incorporated into GAAP.) The PCC will also serve as the primary advisory body to FASB on the appropriate treatment for private companies for items on FASB’s agenda.

The private company plan generally follows the outline of the initial FAF proposal announced last October, but includes several significant changes and improvements.  Unlike the proposed plan, the FAF changed the process through which FASB considers PCC recommendations for private company exceptions to GAAP from one of ratification to one of endorsement.  In addition, under the final plan the PCC chair will not be a FASB member.  CUNA urged the FAF to make both of these changes in our January 2012 comment letter, which was developed with significant input from our Accounting Subcommittee.

CUNA will be reviewing the FAF’s final report in detail with our Accounting Subcommittee and I will include an update on the PCC and our involvement with it in subsequent Regulatory Advocacy Reports.

Last week, the Financial Literacy and Education Commission (FLEC) held its quarterly meeting; FLEC is comprised of the heads of 20 federal agencies, including NCUA and the other financial regulators.  The meeting included a review of a recent survey conducted by the Federal Reserve Board on consumers and mobile financial services.

With regard to better informing consumers, Director Cordray highlighted the CFPB’s Ask CFPB tool on its website.  Ask CFPB features hundreds of questions (provided by the Bureau and submitted by the public) and answers (provided by experts at the Bureau).  With regard to bringing decisions down to a level that can be better understood, for the CFPB this means bringing more transparency and accountability to the financial markets.  “We don’t think you should need a law degree to read a bank account statement or a credit card account agreement,” stated Cordray.  The CFPB has been approaching this through its Know Before You Owe program, which is intended to simplify the choices people are presented with to allow them to actually estimate accurately the costs and risks associated with a financial product or service.

Also last week, CUNA, North Carolina League staff, and credit unions attended the CFPB’s field hearing on prepaid cards in Durham, NC.  At the hearing, CFPB Director Richard Cordray spoke about agency’s goals to improve the safety and transparency of prepaid cards and their providers.  Credit unions in attendance included Self Help CU, Piedmont Advantage CU, Premier FCU, North Carolina State Employees' CU, and Welcome FCU. 

At the hearing, the CFPB released an advance notice of proposed rulemaking (ANPR) to seek comments, data, and information regarding general purpose reloadable (GPR) prepaid cards, and a fact sheet on the prepaid card industry.  Based on responses to the ANPR, the CFPB intends to issue a proposal to extend certain Regulation E protections to GPR prepaid cards.  The CFPB is interested in more information regarding prepaid cards in these areas under the ANPR: 1) fees and terms disclosures, including deposit insurance; 2) unauthorized transactions, including liability provisions; and 3) prepaid card product features, including credit, savings, and credit repair.  Comments on the ANPR are due to the CFPB by July 23, 2012.  In addition, the CFPB released their Ask CFPB: Prepaid Cards – an online, searchable tool regarding frequently asked financial questions on prepaid cards. 

CUNA will continue to analyze the ANPR on prepaid cards and will be providing a regulatory comment call shortly.  We continue to work with Leagues, credit unions, the CUNA Payments Policy and Consumer Protection Subcommittees, and others on prepaid card and payment regulatory issues. 
The CFPB has released a notice and request for comment regarding its plans to collect information on compliance costs and other effects of its potential regulations, including those required under the Dodd-Frank Act.  Specifically, the CFPB plans to collect information on potential implementation and ongoing compliance costs, as well as other associated costs and effects of its potential new regulations on financial institution providers (providers) and consumers. For example, the CFPB plans to collect qualitative information from mortgage and remittance industry participants regarding their potential costs to comply with CFPB regulations. Also, the agency is interested in how its regulatory changes impact the unit costs of delivering such financial services.  The CFPB plans to collect information on compliance costs using structured interviews, focus groups, conference calls, written questionnaires, and online surveys.  CUNA is interested in your comments on this information collection; please review our regulatory comment call and submit any comments by June 11.

On Wednesday, CUNA staff attended the Federal Trade Commission (FTC) workshop on mobile and online media privacy.  The workshop, entitled, "Advertising and Privacy Disclosures in a Digital World" included panel discussions from senior staff at the FTC and other regulators; companies that provide services on mobile devices and on websites; and consumer groups.  At the workshop, the panelists discussed advertising and privacy disclosures and regulations, and the challenges with social media and mobile device transactions.  In March, the FTC issued a report on its privacy best practices framework for businesses, its recommendations regarding consumer privacy and disclosures, and its recommendations to Congress.  Earlier this month, the FTC also testified before the Senate Committee on Commerce, Science, and Transportation on privacy regulations.  CUNA continues to monitor developments in privacy and disclosures and the potential effects on credit unions, consumer protection, and mobile payments.

The CFPB has issued a proposed rule regarding procedures for the CFPB to supervise a nonbank that the agency believes is engaging, or has engaged, in conduct that poses risks to consumers with regard to consumer financial products or services.  Under the proposed rule, the CFPB will notify a nonbank that it is being considered for supervision; the nonbank will have an opportunity to respond to the CFPB; there is a mechanism for a nonbank to file a petition to apply for the termination of CFPB supervision authority after two years; and there are procedures for a nonbank to voluntarily consent to CFPB supervision.  While CFPB rules for nonbanks do not apply to credit unions, CUNA continues to monitor the CFPB supervision of nonbank entities and the implementation of the Dodd-Frank Act.  We will continue to advocate that the CFPB should focus on entities that are engaging in abusive practices in the financial marketplace, and should take steps to alleviate regulatory burdens for credit unions and to minimize any effects on credit union service organizations.  We will be providing a regulatory comment call shortly.

I can’t stress enough that our highest regulatory advocacy priority is to improve the environment for credit unions from the standpoint of minimizing new rules. This effort is ongoing and as this report shows, there is much to be done in coming weeks to address regulatory burdens for credit unions.

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