Initial Analysis of CHOICE 2.0
Posted April 20, 2017 by CUNA Advocacy

We are continuing to wade through the nearly 600 pages in the Financial CHOICE Act 2.0, but our initial analysis indicates that there are several aspects of it that are good for credit unions, others that are more helpful to other financial services marketplace participants, and certain changes we would have liked to see in the legislation that are not.

Let’s start with the good news. A few of the provisions that we believe could help improve the operating environment for credit unions are as follows in the legislation:

More Checks on Rulemakings - Includes several provisions that require more analysis and greater checks and balances before an agency can engage in rulemakings, including additional cost benefit analysis and other economic analysis.


  • Adjustments to the definition of High Cost Mortgage (from 8.5% to 10%);
  • Adjustments to the definition of “Mortgage Originator” to include manufactured homes;
  • Provides QM status for all loans held in portfolio;
  • Exemption for Small Creditors from mortgage Escrow Requirements (under $10 billion in assets and for those who service under 20,000 loans)

HMDA Specifically - Increases the thresholds to 100/200 for open-end/closed end mortgages (This is an increase from the current 25/100 threshold). It also requires a privacy study for HMDA data collection.

Removal of Agency UDAAP authority - Removes the CFPB’s rulemaking and enforcement authority for UDAAP.

Preservation of UDAP authority for Federal banking regulators - Gives FTC authority to promulgate a UDAP rule – then within 60 days the NCUA would have to promulgate a rule unless it finds that that such acts or practices of depository institutions are not unfair or deceptive.

Prohibition of Government price controls for payment card transactions - Durbin Amendment repealed entirely.

Bringing the Agency into the regular appropriations process - Requires CFPB to get approval from Congress for funding.

Consumer Law Enforcement Agency Inspector General Reform - Separate IG to oversee the work of a single director who is confirmed by Congress and testifies at semi-annual hearings.

Civil investigative demands to be appealed to courts - Requires setting a meeting within 30 days of receiving a CID to attempt to resolve agency concerns.

Agency dual mandate and economic analysis - Changes Section 1022 to require that the Director shall seek to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of strengthening participation in markets by covered persons and establishes office of economic analysis.

No deference to Agency interpretation - Strikes the provision in the Dodd-Frank Act giving the CFPB deference over other agencies in its interpretation of consumer financial laws. (for example FTC interpretation of UDAP)

Advisory opinions - Requires that the CFPB provide written opinions about compliance.

Repeal of Council authority to set aside Agency rules and requirement of safety and soundness considerations when issuing rules - Requires the CFPB to take safety and soundness into consideration when issuing rules.

Repeal of authority to restrict Arbitration - Repeals the CFPB’s authority to write rules for arbitration.

Repeal of Department of Labor fiduciary rule and requirements prior to rulemaking relating to standards of conduct for brokers and dealers - Repeals DOL Fiduciary rule and directs that the DOL cannot put a fiduciary rule out unless the SEC puts one out first.

Senior Safe Act Language – Provides protections for reporting elder financial abuse.

Small Business Loan Data Collection - Repeals the CFPB Small Business Loan Data Collection program.

Operation Choke Point: Prohibits regulators from forcing a financial institution to close certain accounts for certain industries.

Exam and Appeal Reforms (CFPB and NCUA) – Provides additional rights for the conduct and appeal of Examinations, Independent Review of Exams (Note: NCUA extended exam cycle is not included as NCUA has adopted this already).

Budget and OTR Transparency (NCUA) – Requires notice and opportunity to comment on NCUA’s budget and requires detailed information on the OTR.

Risk-Based Capital -  Directs regulators to adjust the Risk-Based Capital standards appropriate to risks posed by current activities and businesses, forward looking only.

Things we have some initial concerns about:

NCUA under Appropriations – Brings NCUA operating fund, but not the Share Insurance Fund, under the appropriations process .  This provision is improved from the previous version of the CHOICE Act but remains of concern.

Payday and Title Lenders – Removes the CFPB’s authority to do a small dollar rule for payday and title lenders. While CUNA had significant concerns that the CFPB’s proposed small dollar rule swept in credit unions who are the safest and most affordable option for lenders in this market, there is some egregious behavior in this market by nonbank lenders that would benefit consumers if addressed.

Big Banks getting Bigger – There is a provision that could make it easier for the largest banks to continue to grow because it removes the 10% domestic deposit exemption.

Federal Savings Association Charter Flexibility - We strongly oppose the provisions that would allow federal savings associations (S&Ls) to operate with the duties and responsibilities of national banks, and thereby circumventing the business lending cap under which thrifts operate, unless similar legislation enhancing the flexibility of the credit union charter is added.


Things we think should be included but are not:

Credit Union Exemption - We still believe that small financial institutions exemption language such as what we have seen in H.R. 1264 would serve consumers by ensuring that credit unions and community banks are not harmed by one-size fits all rules that favor those that caused the financial crisis and other abusers of consumers.

Five Person CFPB Commission - We also continue to believe a five-person CFPB commission would help provide more voices and transparency to rulemaking and enforcement at the CFPB. 

1 to 4 - Under current law, when a bank makes a loan for the purchase of a 1-4 unit, non-owner-occupied residential property, the loan is classified as a residential real estate loan. However, when a credit union makes the same loan, it is required to be classified as a business loan, and is therefore subject to the statutory member business lending cap. 

This is our early analysis of the legislation and we will continue to review it with our team to determine other potential impacts on credit unions.

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