Removing Barriers Blog

CFPB responds to 329 House Members on Exemption Authority
Posted April 15, 2016 by Chandler Schuette

This week, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray responded in a letter  to the 329 House Members, led by Congressmen Adam Schiff (D-Calif.) and Steve Stivers (R-Ohio), who wrote a letter to the CFPB in March.  The  Members wrote to the CFPB to express concerns that Bureau rulemakings were unintentionally limiting services and increasing costs for credit unions and community banks. The letter also urged the CFPB to make greater use of its authority in Section 1022 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) which allows the Bureau to exempt credit unions from certain rulemakings. 

In his response letter, Directory Cordray outlines the Section 1022 requirement that the Bureau consider the potential benefits and costs to consumers and covered persons, including the potential reduction of access to consumer financial products and services. He also cites the need to promote fair competition under Section 1021 of the Dodd-Frank Act. He once again recognized that credit unions did not cause the financial crisis, and outlined multiple ways in which the Bureau has provided relief for smaller financial institutions.   

He mentioned the  recently issued interim final rule, which broadened the exemption for small creditors under the Truth in Lending Act's Regulation Z, which will allow more credit unions operating in rural or underserved areas to originate balloon mortgages and higher-priced mortgage loans. We are very pleased with this change made by the CFPB, which was based on passage of the Helping Expand Lending Practices in Rural Communities Act at the end of 2015. We think this interim final rule is a step in the right direction in providing focused rulemaking with exceptions for responsible lenders such as credit unions. 

While Director Cordray also cites the exemption of lower-volume depository institutions from HMDA reporting as an example of providing exemptions for certain creditors,  we've pointed out on numerous occasions that this exemption does not go far enough to provide relief to credit unions.  We have suggested an exemption from reporting on HELOCs, which would provide meaningful relief to credit unions, since this reporting was previously voluntary.   

The CFPB also cites an amendment to the Electronic Fund Transfer Act, which states remittances requirements do not apply to transfers sent by entities that provide 100 or fewer remittances. As we  have continually pointed out to the CFPB, the international remittance transfer (IRT) final rule has crippled credit union participation in this market. According to a survey of CUNA members, this rule caused almost half of credit unions offering remittance services to their members to either to stop offering remittances or to reduce the number them. 

While we are thankful to see some exemptions in the mortgage rules for smaller credit unions, these exemptions are minimal, on the whole. The thousands of pages of new regulations from CFPB are a continuing burden on credit union operations. We feel that the Bureau has an important opportunity to provide more consequential relief to credit unions during upcoming rulemakings on payday lending, debt collection, and overdraft protection.  

We appreciate the leadership of Congressmen Schiff and Stivers, and the Members who wrote to the CFPB, and we appreciate that Director Cordray responded to the inquiry.