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Washington Archive

Washington

CUNA to CFPB: Avoid One-size-fits-all Payday Regs

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WASHINGTON (5/3/13)--While oversight of largely unregulated, predatory payday lenders and their products is overdue, the Consumer Financial Protection Bureau must take steps to avoid crafting one-size-fits-all regulations that would harm credit unions as it addresses payday loan issues, the Credit Union National Association said in a Thursday letter to CFPB Director Richard Cordray.
In the letter, CUNA President/CEO Bill Cheney commended the CFPB's efforts to ensure payday lenders will be subject to appropriate standards and accountability. However, he said, these efforts must focus on unregulated abusers. Cheney also urged the CFPB to "refrain from adopting new rules that apply to all lenders and that tend to eliminate a diversity of approaches that may be adopted by those with no record of abuse or inadequate existing regulation."
The CUNA commentary follows last week's release of a CFPB study that found many payday loan borrowers face a harmful combination of loose lending standards, high costs, and risky loan structures.
Cheney emphasized that credit unions and CUNA are committed to providing safe and affordable alternatives to predatory payday lenders. "These products address a real need for small-dollar, short-term credit by consumers, while discouraging over-dependence on such credit and helping members to move toward financial stability," he added.
Loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%, although there is some flexibility under the National Credit Union Administration's short-term, small amount loan program. That program permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. For now, this amounts to an interest rate ceiling of 28%. Most credit unions offering payday loan alternatives also limit fees, provide member financial counseling, and encourage members to open savings accounts.
CUNA plans to meet with the bureau on payday loan issues soon.
The letter also addressed another topic of concern to credit unions: The CFPB's final International Remittance Transfer Rule that was issued this week. (Use the resource link for May 1 News Now story: Final CFPB Remittance Rule Is Effective Oct 28.) "While we remain concerned that the exemption level is far too low, the final rule includes several improvements that CUNA urged the agency to adopt and we want to acknowledge your effort to address those issues," Cheney said. CUNA is surveying member credit unions on how the changes could impact their current remittance practices, and will share the results of the survey with the CFPB, he added.
For the full CUNA letter, use the resource link.

HOEPA, ECOA, TILA Guidance Released By CFPB

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WASHINGTON (5/3/13)--The Consumer Financial Protection Bureau on Thursday released plain-English compliance guides detailing recent changes to three rules: the Home Ownership and Equity Protection Act, the Equal Credit Opportunity Act, and sections of the Truth in Lending Act that impact higher-priced mortgage loan appraisals.

The new documents are part of a series of guides and other informational materials the CFPB plans to provide over the next few months on its new mortgage regulations.

The bureau has said the goal of the guidance series is to provide a comprehensive rule summary in a plain language and frequently-asked question format, which makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.

The guides give an overview of the rules, but are not substitutes for the underlying rules, the CFPB emphasized. The Credit Union National Association is reviewing the guidance and will be following up with the CFPB on any issues of concern.

Use the resource link below to access the guides.

Similar plain-English guides on ability-to-repay and qualified mortgage rules, and escrow regulations, were released last month.

CU Magazine Article Warns Of Combined Security Threats

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WASHINGTON (5/3/13)--Criminals are using a mixture of malware, phishing, and sophisticated social engineering strategies to steal data from their victims, and these combined attacks are creating new concerns for credit unions, the Credit Union National Association's BITS Liaison Task Force wrote in the just-released May issue of  Credit Union Magazine.

Safeguarding information, accounts, systems, and processes is increasingly challenging to manage in the face of these "blended threats." The attacks "are effective because many audit processes lag behind in detecting gaps that stretch across various departments," the task force piece said.

To better address these threats, CUNA's BITS Liaison Task Force recommended that credit unions:

  • Improve their data visibility across multiple sources to enable greater identity capabilities;
  • Perform a risk assessment to collectively identify current capabilities and security gaps; and
  • Design solid security measures to mitigate exposure risks.
"Organizations might have many approaches in how to bring these various disciplines together to work as a cohesive unit. Some might consolidate risk groups under a single management structure and others might introduce independent audit or risk management groups to look across different areas," the CUNA task force noted.

For the full Credit Union Magazine article, and more engaging stories, use the resource link.

Comment On QM/Repay Regs Due By June 1

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WASHINGTON (5/3/13)--Credit unions and others that wish to comment on recently proposed ability to repay/qualified mortgage (QM) and mortgage servicing rule clarifications will have to do so by June 1.

The clarifications, which were published in the Federal Reserve this week, are meant to address questions that have been posed in the months since the rules were first issued. The clarifications address:
  • Small servicer exemptions;
  • Debt-to-income ratios;
  • Contract variances and the temporary QM provision;
  • Purchase, guarantee or insurability status and the temporary QM; and
  • Field preemption under Regulation X.
The CFPB issued standards to define a "qualified mortgage" under the agency's "ability to repay" rules, and mortgage servicing rules, in January.

For the proposed CFPB clarifications, as published in the Federal Register, use the resource link.

CFPB Sets Consumer, Student Lending Sessions

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WASHINGTON (5/3/13)--Remittances, payday loans, consumer engagement tools and financial services in new American communities will be on the agenda when the Consumer Financial Protection Bureau's Consumer Advisory Board (CAB) holds its second meeting of 2013 on May 15 in Los Angeles.
The CFPB has also scheduled a May 8 student lending field hearing for May 8 in Miami, Fla.
The two-day Los Angeles CAB meeting will feature a public listening session on May 15, with remarks by CFPB Director Richard Cordray. A preview of the CFPB en espanol website, and a feedback session on the site, are also set for May 15. Policy discussions and CAB committee reports are scheduled for the May 16 portion of the CAB meeting.
Two credit union representatives are among the 25 CAB members. Bill Bynum, CEO of Hope Enterprise Corp. and Hope Community CU, Jackson, Miss., serves as vice chair of the CAB. Laura Castro de Cortes, vice president of alternative financial services for Centris FCU, Omaha, Neb., is a CAB member.
The board advises CFPB leadership on consumer financial issues and emerging market trends.
Cordray is also scheduled to speak at the May 8 student lending hearing. The CFPB has not announced witnesses for that hearing, but testimony from the consumer groups, industry representatives, and members of the public is expected, the bureau said.
For more on the CAB meeting and field hearing, use the resource links.