Removing Barriers Blog

CUNA Examines Treasury's Report on Financial System
Posted June 13, 2017 by Chandler Schuette

The U.S. Treasury released a report titled, “A Financial System That Creates Economic Opportunities Banks and Credit Unions.” The report was issued in response to Executive Order 13772 on Core Principles for Regulating the United States Financial System. A number of credit unions and CUNA staff met with Treasury in April to outline areas where regulatory burdens are harming the ability of credit unions to serve their members. Much of what was discussed in that meeting and in follow-up letters sent afterwards is reflected in the Treasury’s report. CUNA appreciates that Treasury listened to, and understands that changes should be made to allow them to have greater ability to provide members with safe and affordable products and services. 

After the meeting, CUNA sent a letter to Secretary Steven Mnuchin thanking the Treasury for hosting the Credit Union Roundtable on April 4th and providing additional information on the ways regulations can be streamlined and more manageable for credit unions. CUNA also sent a letter to the CFPB and the Administration highlighting areas where the Bureau can make changes to rules and policies to improve the operating environment for credit unions. Many of CUNA’s suggestions are reflected in the Treasury’s recommendations below: 

National Credit Union Administration 

  • Recalibration of NCUA Regulations: NCUA regulations related to credit union capital and stress testing should be recalibrated: 

    RBC: Revise Risk Based Capital to apply to $10 billion and over or eliminate requirements for those with 10% net worth; 

    Stress Testing: Stress testing threshold raised from $10 billion to $50 billion; 

    Supplemental Capital: Allow credit unions to rely on appropriately designed supplemental capital to meet a portion of their Risk Based Capital requirements; and 

  • CECL: Revisiting CECL requirements (states they may be unnecessary); 

  • Streamline De Novo Applications: Recommends streamlining the application process for De Novo credit unions to encourage new charters; 

  • Call Reports: Recommends call reports be simplified and streamlined 

  • Exam Thresholds:  Exam thresholds for extended exam cycle (18-month) should be raised over the current $1 billion level or eliminated; 

  • Data Collection:  Recommends better coordination and rationalization of examination and data collection procedures to promote accountability and clarity; 

  • Agricultural and Rural Credit Unions:  Regulators should tailor and give special consideration for agricultural and rural financial institutions; 

  • Board Duties:  Recommends revisions for Boards of Directors to appropriately tailor duties recognizing the distinction between management and boards to restore the balance between regulators, Boards and management; 

  • Cost-Benefit Analysis:  Increased use of Cost-Benefit Analysis. 

Consumer Financial Protection Bureau 

Structural Reforms 

  • Make the CFPB Director removable “at-will” instead of “for cause” 

  • Funding through the appropriations process 

  • Subject to OMB apportionment 

  • Civil Penalty Fund restructured 

Increased Regulatory Certainty 

  • CFPB should issue rules or guidance subject to public notice and comment procedures before bringing enforcement actions in areas in which clear guidance is lacking or the CFPB’s position departs from the historical interpretation of the law. 

  • The CFPB should adopt regulations that more clearly delineate its interpretation of the UDAAP standard. The agency should seek monetary sanctions only in cases in which a regulated party had reasonable notice—by virtue of a CFPB regulation, judicial precedent, or FTC precedent—that its conduct was unlawful. The CFPB could implement this reform administratively through issuance of a regulation limiting the application of monetary sanctions to cases that satisfy this notice standard. 

  • The CFPB should make the requirements for CFPB no-action relief less onerous. 


  • The CFPB should bring enforcement actions in federal district court rather than use administrative proceedings. 

  • The CID process should be reformed to ensure subjects of an investigation receive the benefit of existing statutory protections, backed by judicial review. 

Regulatory Review 

  • The CFPB should promulgate a regulation committing it to regularly reviewing all regulations that it administers to identify outdated or otherwise unnecessary regulatory requirements imposed on regulated entities. 

Complaint Database 

  • The CFPB’s Consumer Complaint Database should be reformed to make the underlying data available only to federal and state agencies, and not to the general public. 

Supervisory Authority 

  • Congress should repeal the CFPB’s supervisory authority. The responsibility to supervise banks should be entrusted to the prudential regulators. Supervision of nonbanks should be returned to state regulators. 

Mortgage Issues 

  • Adjust and Clarify the ATR Rule and Eliminate the “QM Patch”: The CFPB should engage in a review of the ATR/QM rule and work to align QM requirements with GSE eligibility requirements, ultimately phasing out the QM Patch and subjecting all market participants to the same transparent set of requirements. These requirements should make ample accommodation for compensating factors that should allow a loan to be a QM loan even if one particular criterion is deemed to fall outside the bounds of the existing framework, such as when a borrower has a high DTI ratio with compensating factors. 

  • Modify Appendix Q of the ATR Rule: Appendix Q should be simplified and the CFPB should make much clearer, binding guidance for use and application. The CFPB should review Appendix Q standards for determining borrower debt and income levels to mitigate overly prescriptive and rigid requirements. Review of these requirements should be particularly sensitive to considerations for self-employed and non-traditional borrowers. 

  • Revise the Points and Fees Cap for QM Loans: The CFPB should increase the $103,000 loan threshold for application of the 3% points and fees cap, which would encourage additional lending in the form of smaller balance loans. The CFPB should scale points and fees caps in both dollar and percentage terms for loans that fall below the adjusted loan amount threshold for application of the 3% points and fees cap. 

  • Increase the Threshold for Making Small Creditor QM Loans: Raising the total asset threshold for making Small Creditor QM loans from the current $2 billion to a higher asset threshold of between $5 and $10 billion is recommended to accommodate loans made and retained by small depository institutions. In order to maintain a level playing field across institution types, an alternative approach to this recommendation would be to undertake a rulemaking to amend the QM rule and related processes for all lenders regardless of type. 

  • Clarify and Modify TRID: The CFPB could resolve uncertainty regarding what constitutes a TRID violation through notice and comment rulemaking and/or through the publication of more robust and detailed FAQs in the Federal Register. The CFPB should allow a more streamlined waiver for the mandatory waiting periods, in consultation with all market participants, including both lenders and realtors. The CFPB should allow creditors to cure errors in a loan file within a reasonable period after closing. 

  • Improve Flexibility and Accountability of Loan Originator Compensation Rule: The CFPB should improve flexibility and accountability of the Loan Originator Compensation Rule, particularly in those instances where an error is discovered post-closing, in order to facilitate post-closing corrections of non-material errors. The CFPB should establish clear ex ante standards through notice and comment rulemaking, which will clarify its enforcement priorities with respect to the Loan Originator Compensation Rule. 

  • Delay Implementation of HMDA Reporting Requirements: The CFPB should delay the 2018 implementation of the new HMDA requirements until borrower privacy is adequately addressed and the industry is better positioned to implement the new requirements. The new requirements should be examined for utility and cost burden, particularly on smaller lending institutions. Consideration should be given to moving responsibility for HMDA back to bank regulators, discontinuing public use, and revising regulatory applications. 

  • Place a Moratorium on Additional Mortgage Servicing Rules: The CFPB should place a moratorium on additional rulemaking in mortgage servicing while the industry updates its operations to comply with the existing regulations and transitions from HAMP to alternative loss mitigation options. In addition, the CFPB should work with prudential regulators and state regulators to improve alignment where possible in both regulation and examinations. 

Small Business Lending 

  • Repeal the provisions of Section 1071 of the Dodd-Frank Act pertaining to small businesses to ensure that the intended benefits of Section 1071 do not inadvertently reduce the ability of small businesses to access credit at a reasonable cost. 

  • Simplify, adjust, or change certain financial regulations for financial institutions serving small businesses.