Removing Barriers Blog

NCUA Tells CFPB Regulatory Relief is Warranted for Credit Union
Posted May 24, 2017 by mcarew

In a letter to CFPB Director Richard Cordray, NCUA Chairman McWatters highlighted rules and policy makings the CFPB should reconsider to account for the different size and structure of credit unions. It specifically notes that rules can be particularly burdensome to smaller credit unions, who have an average of eight employees – specifically remarking that it can be a struggle to stay abreast of complex and evolving compliance requirements without the retention of often cost prohibitive counsel, accountants, financial advisors, and other professionals. 

The letter reiterates the call for the CFPB to exempt the NCUA payday alternative loan (PAL) program from its payday and small dollar rule. It also further notes that the NCUA is already providing members with the, “consumer protection the Bureau hoped to realize, rendering application of the proposed rule and the associated cost redundant and unnecessary.” 

The letter further notes that “there are many additional areas where regulatory relief is warranted for credit unions and community banks, there are two in particular that justify consideration on the merits.” These include the Home Mortgage Disclosure Act and the Unfair, Deceptive and Abusive Acts or Practices (UDAAP) requirements of the Dodd-Frank Act. 

For HMDA, the NCUA highlights several specific changes that should be made to the CFPB’s final rule. It states that consideration should be given by the CFPB to raising the various thresholds to a more substantive asset and transaction volume level to further reduce the reporting burden on smaller credit unions. The letter further highlights concerns with requiring the reporting of 25 new data points. 

For UDAAP, the NCUA notes that there is no precedent for the abusive prong under the FTC Act. The letter then states that the CFPB has yet to issue a regulation or formal guidance to further define the term and implement its UDAAP authority. It urges the CFPB to provide clarity with respect to UDAAP for credit unions either through a rulemaking or guidance. 

Additionally, the letter also addresses the CFPB’s failure to use its Section 1022(b)(3)(A) exemption authority which allows it to exempt any class of person, service providers, or consumer financial services. It states, “Use of this permitted, yet underutilized, statutory authority is appropriate to address compliance costs and the unintended consequences of limiting access to affordable financial services for many millions of middle class credit union members through the enactment of needless regulatory burden.” Adding that, “Among the factors involved in determining whether to provide an exemption include asset size and volume of transactions.”  

Chairman Waters goes on to state that he urges the CFPB to exercise its exemption authority whenever possible with respect to credit unions, given the community’s long history of serving their members and protecting consumers. 

CUNA has expressed many of these same points to the CFPB and appreciates that NCUA recognizes the important of protecting credit unions and their 110 millions members.