Removing Barriers Blog

CUNA Continues Request to CFPB to Clear Up Ambiguity Under TRID Rule
Posted July 29, 2015 by CUNA Advocacy

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 clarification.

“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 industry.”

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 available.”

A copy of the letter can be viewed here.