CUNA Regulatory Advocacy Report

CUNA Regulatory Advocacy Report: January 27, 2012

Here is our CUNA Regulatory Advocacy Report for the week of January 27, 2012, which highlights some of the issues we have been dealing with this week. This report supplements the NCUA Board meeting summary.

Update On Further CUNA Actions to Address Concerns with NCUA

CUNA continues to pursue concerns raised by the Government Accountability Office’s study regarding NCUA’s use of prompt corrective action and NCUA’s failure to provide the GAO with sufficient information relating to its loss estimates for the legacy assets of the five failed corporate credit unions. CUNA is following up with NCUA’s Office of Inspector General regarding the legacy assets issue. CUNA is also concerned that as a result of the report, which is summarized here, NCUA will issue new regulations to impose additional regulatory or reporting requirements on credit unions in order to supplement the use of net worth to reflect a credit union’s overall financial strength. CUNA is urging NCUA not to impose any new safety and soundness requirements that would necessitate agency sanctions if the requirements are not met. CUNA will make available a more detailed review of the GAO report early next week.

CUNA Continues Work on Multi-Featured Open-End Lending Issues

As I reported to you in the November 11, 2011 issue of our Regulatory Advocacy Report, CUNA staff is continuing to work with CUNA Mutual, NCUA and the CFPB to pursue concerns relating to the regulation of Multi-Featured Open-End Lending (MFOEL). CUNA continues to urge the agencies to issue clarifications regarding MFOEL for both credit unions and examiners to reduce the confusion that has resulted from changes to Regulation Z which occurred in January, 2009, with these changes becoming mandatory on July 1, 2010. Click here for a letter that we submitted to the CFPB in December, 2011 on this issue. Additionally, this week, staff from CUNA and CUNA Mutual have been working on proposed clarifications which we will share with NCUA and the CFPB today. Last week, Senior Staff from CUNA held conversations with both NCUA and the CFPB on this important issue, urging both agencies to work together to issue the needed clarifications in this important area. As always, we will continue to monitor any new developments in the area of MFOEL and inform you of any updates.

Treasury Department Holds First Roundtable Meeting Regarding Diversity Issues under the Dodd-Frank Act

January 26th, the Department of the Treasury held its first industry roundtable meeting regarding implementing Section 342 of the Dodd-Frank Act. Section 342 requires the directors of each financial agency, including the National Credit Union Administration (NCUA), to “develop standards for assessing the diversity policies and practices of entities regulated by the agency.” However, Section 342 specifically prohibits the agencies from requiring “any specific action” based on the findings of these assessments. Section 342 also requires that the agencies may not implement these standards in any way that could “affect the lending policies and practices of any regulated entity.” The assessments that NCUA and other agencies will carry out under Section 342 would be based solely on how regulated entities take diversity into account in employment, procurement and contracting practices. Each agency, including NCUA, has developed an Office of Minority and Women Inclusion (OMWI) to oversee implementation of Section 342. The roundtable discussions held on January 26 included representatives from several financial industry trade associations and at least one representative from each agency charged with implementing this rule.

CUNA is concerned how this provision may be implemented. At the meeting, CUNA stressed that complying with diversity-related assessments could create undue regulatory burdens for credit unions, especially for small credit unions. CUNA has urged NCUA to reach out to credit unions of all sizes before developing any standards to fully understand the potential compliance and other impacts of such assessments, and to minimize the compliance burden for all credit unions. NCUA plans to coordinate with CUNA to arrange roundtable discussions with credit unions of differing sizes.

The agencies have not yet developed any diversity-related assessment standards, and plan to seek input from regulated entities before doing so. At the roundtable discussions, the agencies (including NCUA) stated that they plan to hold roundtable discussions with regulated entities throughout the months of February and March to begin their information gathering efforts in order to develop the requisite diversity-related assessment standards. The agencies do not believe they can begin any assessment process under Section 342 until such standards are developed.

CFPB “Remittance Transfers” Final Rule and New Proposal

January 26th, CUNA discussed concerns and regulatory as well as legislative next steps with other financial groups such as the Clearing House Association and NACHA, regarding the Consumer Financial Protection Bureau’s (CFPB) final rule on “remittance transfers,” money that consumers send to foreign countries electronically, released a week ago. Click here for the CFPB’s summary of the rule.

The CFPB has also issued a new related proposal to further define the final rule. CUNA has been working with WOCCU to identify key points and concerns for credit unions under the remittance transfers final rule that is effective one year from the date of publication in the Federal Register. Generally, credit unions and other remittance transfer providers must disclose the exchange rate and all fees associated with an international money transfer so consumers know exactly how much money will be received. There is a limited, partial exception on the disclosure requirements for federally-insured credit unions until at least 2015, and possibly until 2020, as well as a limited exception on certain consumer ACH transfers sent to certain countries. Even with these limited exceptions, credit unions and others will have to fully comply with the rule’s other requirements such as error resolution and liability provisions, and must still provide consumers with disclosures with estimates of likely exchange rates, fees, and taxes. We are currently reviewing the final rule and will post a more detailed summary shortly.

The new remittances transfers’ proposal concerns the safe harbor provisions for the definition of a “remittance transfer provider” and several areas related to transfers that are scheduled in advance, including preauthorized transfers and disclosure requirements. We will continue to work with credit unions, leagues, WOCCU, the CUNA Payments Policy and Consumer Protection Subcommittees, and others.

CUNA’s Comments on CFPB Policy Statement – Public Release of Certain Credit Card Complaint Data (Large Issuers)

CUNA has filed a comment letter to the CFPB on its proposed policy statement on the public release of credit card complaint information from credit card issuers with more than $10 billion in assets. In our letter, we expressed significant concerns regarding the public release of certain credit card complaint information that is separate from and in addition to the agency’s periodic reports and analyses, which provide more complete credit card complaint information to consumers. We have significant concerns the proposed public data release could have misleading implications and unintended consequences and also urge the agency to minimize regulatory burdens and privacy risks. Under the Dodd-Frank Act, the CFPB was required to facilitate a centralized collection of consumer complaints. The agency currently collects information relating to credit card complaints that include both “non-narrative” and “narrative” information. Under the proposed policy statement, the CFPB would be able to release only “non-narrative” data that do not contain confidential information in an online, searchable database that would include: the type of complaint; the name of the card issuer; the consumer’s zip code; the date of complaint; and whether and how the issuer responded.

CUNA Conferences with CFPB, NCUA and the Federal Reserve Board on Dodd-Frank Mortgage Issues

CUNA staff has held conference calls both last week and this week with attorneys from NCUA, the Consumer Financial Protection Bureau and the Federal Reserve Board as the agencies press forward in their rule-writing efforts as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Specifically, the agencies are reaching out to CUNA and credit unions to obtain feedback with respect to the residential real estate appraisal rulemakings and requirements currently being drafted by the agencies. Topics on these calls included discussion of the appraisal requirements for “higher-risk mortgages under Section 1471 of the Dodd-Frank Act, appraisal management company minimum requirements under Section 1473(f)(2) of the Dodd-Frank Act, and the quality control standards being developed surrounding the usage of automated valuation models (AVMs) under Section 1473(q) of the Dodd-Frank Act. On a separate conference call, CUNA and CUNA mutual staff discussed the topics of force-placed (lender-placed) insurance, hybrid ARM notices, and error resolution and payment crediting with CFPB attorneys, as the agency continues to draft certain mortgage servicing related rules required by the Dodd-Frank Act. In addition to these initiatives, CUNA continues to work with its Government Sponsored Enterprises (GSE) Reform Task Force and Lending Council in its advocacy efforts relating to housing finance reform, in general. Both CFPB and NCUA attorneys continue to seek input from CUNA in these important rule-writing areas, and we will update you as this process continues over the coming months.

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