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On Tuesday, CUNA President/CEO Jim Nussle requested The Consumer Financial
Protection Bureau (CFPB) to clear up an ambiguity surrounding the definition of
“small creditor” as it relates to the bureau’s new mortgage rules.
“We are now aware of several groups engaged in training who continue to
mimic the erroneous information previously provided by the CFPB,” Nussle wrote.
“We have further identified potentially 700 credit unions that might be
operating under the premise that they are exempt from the rule, and we imagine
many other creditors may also be following this incorrect interpretation.”
CUNA has estimated that 700 credit unions would be exempt from the bureau’s
Truth in Lending Act-Real Estate Settlement Procedures Act integrated
disclosure (TRID) rule. In fact, many
may be unaware that they are subject to the rule.
This is based on the definition of “small creditor” from the bureau’s
September 2014 Small Entity Compliance Guide, which states entities that make
five or fewer mortgages per year do not count as a creditor, thus are not
subject to TRID.
However the Small Entity Compliance Guide was updated this spring to read
“the rule also does not apply to loans made by a person or entity that is not a
creditor,” with no mention of the five-or-fewer threshold.
CUNA noted the discrepancy in June and wrote to the CFPB requesting
“We believe the agency needs to go further and make a clear public
announcement and correction of this issue so the incorrect interpretation is
not further perpetuated throughout the industry,” Nussle wrote. “We believe
such a public announcement and correction is critical given that other smaller
creditors, in addition to credit unions, may not understand this nuance in the
rule and it could lead to non-compliance and liability throughout the
Nussle added that the miscommunication warrants an “extended compliance
deadline or safe harbor from enforcement and legal liability” until Jan. 1,
2016, at the earliest.
“We have heard from some credit unions that the recent discovery that they
have to comply with the rules has led them to stop mortgage lending completely
due to concerns they will not be able to comply by the deadline at this late
stage,” he wrote. “This lack of access to credit is damaging to consumers,
particularly those in rural and underserved areas with limited credit options
A copy of the letter can be viewed here.
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