CUNA Regulatory Advocacy Report

Regulatory Advocacy Report: February 17, 2012

Here is our CUNA Regulatory Advocacy Report for the week of February 17, 2012, which highlights some of the issues we have been dealing with since our last report. Click here to access our Regulatory Comment Calls on the issues addressed in this report and others.

NCUA Board Chair and Agency Senior Staff Meet with CUNA on Issues Facing Credit Unions

As part of CUNA’s ongoing regulatory advocacy efforts, yesterday I met with National Credit Union Administration (NCUA) Board Chairman Debbie Matz to discuss a range of concerns credit unions have about regulations and examinations. She was accompanied by her General Counsel Mike McKenna, Chief Policy Advisor and Director of the Office of Public and Congressional Affairs Todd Harper, Chief of Staff Steve Bosack, Executive Director Dave Marquis, Director of Examinations and Insurance Larry Fazio, and Senior Advisor to the Chairman Buddy Gill. Accompanying me were CUNA Chief Economist Bill Hampel, General Counsel Eric Richard, and Deputy General Counsel Mary Dunn.

We had a frank and robust discussion on a range of specific concerns credit unions are confronting, including agency proposals such on loan participations (see story below) and others. We also discussed examination concerns, focusing on an issue a number of credit unions have raised: examiners frequently directing the credit union to take actions without providing the authority for such actions. When this occurs, credit unions often feel the examiner is acting arbitrarily and may not have a justified basis for the directive. As we agreed, CUNA’s Examination and Supervision Subcommittee will be following-up with NCUA’s Fazio to pursue these concerns further.

Other issues that were raised included the need for additional guidance that is flexible and consistent with the Truth in Lending Act and Regulation Z on the use of Multi-Featured Open-End Lending programs. Chairman Matz indicated her support for the program and has asked Consumer Financial Protection Bureau (CFPB) Director Cordray to address credit unions’ concerns favorably. CUNA has been working with CUNA Mutual Group to pursue this issue with the CFPB as well (see story below).

Other matters we discussed included state regulatory issues, the agency’s priorities for 2012, the NCUA’s Corporate Stabilization Efforts, and NCUA’s coordination with the CFPB.

In terms of NCUA’s priorities for 2012, it appears the agency will confine new rules to those that were issued or announced in 2011, such as those on CUSO’s, loan participations, RegFlex, liquidity, and derivatives without specific plans at this time for other regulations this year. While the agency seems to be running out of issues to regulate, we will continue to push NCUA to contain all regulatory requirements and to be constantly mindful of the regulatory burden credit unions are facing. Chairman Matz did indicate that she does not want to needlessly add to the regulatory burden credit unions are facing and CUNA will continue to work with the agency on that. Regarding NCUA’s Corporate Stabilization efforts, CUNA urged NCUA to be more transparent and provide more information about the performance of the legacy assets of the failed corporate credit unions. NCUA has established two websites to provide more information to credit unions on the stabilization costs and on the NCUA Guaranteed Notes program and has asked CUNA to provide additional recommendations for improving the sites. We also urged NCUA to let credit unions know what the upcoming Corporate Stabilization Fund assessment will be as soon as possible. Concerning coordination with the CFPB, we expressed the real concern that the agency should not borrow supervisory approaches from the CFPB that may be appropriate for the largest banks and implement them for credit unions.

We also discussed the Government Accountability Office’s (GAO’s) report issued in early January on NCUA’s handling of failed credit unions from January 2008 to June 2011. NCUA said that GAO will be coming back to NCUA (although the return may be delayed due to other projects that the GAO has pending) to discuss how the agency is following-up on the two recommendations the GAO report provided. Those recommendations urged NCUA to provide more documentation on how it developed its estimates of the losses associated with the legacy assets of the failed corporate credit unions. The report also recommended NCUA develop earlier indicators of supervisory problems so that it is able to take action even before prompt corrective action would require it, since net worth (the focus of PCA supervisory actions) is a lagging indicator. CUNA’s Examination and Supervision Subcommittee will also be following-up with Larry Fazio on these issues as well.

We will be meeting with NCUA Board Member Gigi Hyland next week.

NCUA’s Loan Participation Proposal Should be Withdrawn

Also yesterday, CUNA filed a 13-page comment letter with NCUA opposing the agency’s loan participation proposal, in the strongest terms appropriate for a letter to a federal agency. As we have been indicating virtually since the proposal was released in December, the proposal has numerous flaws—including the fact that it is unnecessary, misguided, and unsubstantiated.

CUNA’s basic position on this proposal is that it should be withdrawn. However, after considerable review and discussion with a number of CUNA and League groups, including CUNA Council members and credit union officials who operate loan participation programs, we determined that our letter should also provide recommendations to improve the proposal. If adopted, these recommendations will provide credit unions meaningful relief from the onerous terms included in the proposal.

We will continue to urge and insist that NCUA drop this proposal. We also want to ensure that at the end of the regulatory process, credit unions engaging in loan participations are not left with requirements such as the 25% of net worth limit for loan participations from one borrower or other key limitations in the proposal. We have already discussed with NCUA our concerns about this proposal and will be following-up with them in the coming days and weeks. In addition, we have also talked with Treasury Assistant Secretary for Financial Institutions, Cyrus Amir- Mokri, about the proposal and are considering our best options to pursue concerns with policy makers on Capitol Hill. We will keep you posted on all of our advocacy efforts to eliminate or substantially improve this proposal.

CUNA Urges CFPB and NCUA to Revisit Multi-Featured Open-End Lending

Earlier this week, CUNA Mutual Group President and CEO, Jeff Post and I sent a joint letter to CFPB Director Cordray and NCUA Chairman Matz to urge the agencies to revisit the issue of Multi-Featured Open-End Lending (MFOEL). We continue to hear from credit unions that their examiners are providing guidance relating to the Federal Reserve Board’s changes made to Regulation Z’s official staff commentary, which became effective in July of 2010 that is confusing. As discussed above, I, along with other senior staff from CUNA, met with NCUA Chairman Matz to discuss this and other issues of importance to credit unions, and we continue to work closely with both NCUA and the CFPB on this important matter. We will keep you apprised of further developments as we learn of them.

CUNA ABA Routing Number Administrative Board (RNAB) Representative

CUNA is pleased to announce that Ms. Julie Renderos, Senior Vice President of Finance, Suncoast Schools Federal Credit Union, Tampa, FL, will be CUNA‘s representative and voting member on the American Bankers Association (ABA) Routing Number Administrative Board through 2014. The Board’s other voting members include the ABA, NACHA, and the Clearing House Association. The Board focuses on routing number policy and administration, as well as other related payments issues. Ms. Renderos is also a current member of the CUNA Payments Policy Subcommittee. We look forward to working with her and the subcommittee on upcoming routing number and payments issues.

Bank Secrecy Act Advisory Group (BSAAG) Includes CUNA

CUNA has been selected to continue to fill the “Credit Union Industry Trade Group” position on the Financial Crimes Enforcement Network (FinCEN)’s Bank Secrecy Act Advisory Group (BSAAG) through February 2015. The BSAAG consists of representatives from federal regulatory and law enforcement agencies, financial institutions, and trade associations. CUNA has been a member of BSAAG since 2003 and currently participates on the parent group and its working subgroups, including the Banking, Law Enforcement, Prepaid Access, and Suspicious Activity Report (SAR) Review subcommittees. We continue to coordinate and monitor Bank Secrecy Act developments with the CUNA Payments Policy Subcommittee, Examination and Supervision Subcommittee, Leagues, credit unions, CUNA Compliance, and others.

CFPB Issues Model Form Prototype for Mortgage Periodic Statements

On Monday of this week, the CFPB introduced a new model form prototype relating to mortgage loan statements. Section 1420 of the Dodd-Frank Act adds a new section to the Truth in Lending Act relating to “Periodic Statements for Residential Mortgage Loans,” which requires creditors, assignees, or servicers to send the borrower a periodic statement for each billing cycle, unless the consumer receives a coupon book with certain required information. The Dodd-Frank Act requires the CFPB to develop a model form for this statement, which must include the following:

  • The principal loan amount;
  • The current interest rate;
  • The date on which the interest rate may next reset;
  • A description of any late payment fees and any prepayment fee to be charged;
  • Information about housing counselors;
  • Phone number and email address for borrower to obtain information about the mortgage; and
  • Other information the CFPB may prescribe by regulation.

The CFPB currently envisions a possibility that the statement may be transmitted in writing or electronically, and stated that the new prototype form has completed one round of consumer testing, with two more rounds planned. Once the CFPB “polishes” the prototype, the agency plans to propose a rule (including a proposed model form) for notice and comment sometime this summer. The CFPB notes that once the rule is finalized, creditors, assignees, and servicers will have some flexibility to tailor the model form to work for their needs and the needs of their customers. The CFPB is currently seeking feedback on the prototype form. Click here for the prototype form, and here for the CFPB’s press release on this new initiative.

NCUA Seeks Input from CUNA’s Members on Dodd-Frank Act Diversity Initiative

NCUA’s Office of Minority and Women Inclusion (OMWI) very recently reached out to CUNA seeking a list of members interested in participating in NCUA’s first Dodd-Frank Act Section 342 roundtable discussion, which will take place by phone on February 29, from 2:00 – 4:00 PM ET.Section 342 requires the directors of each federal financial agency, including NCUA, to “develop standards for assessing the diversity policies and practices of entities regulated by the agency.” However, Section 342 explicitly prohibits the agencies from requiring “any specific action” based on the findings of these assessments. Section 342 also indicates 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 will be based solely on how regulated entities consider diversity in employment, procurement, and contracting practices. NCUA’s OMWI was developed to oversee implementation of Section 342.

The purpose of NCUA’s roundtable discussion on February 29 is to solicit credit unions’ feedback to assist NCUA in developing its standards under Section 342. NCUA specifically seeks input regarding the approach it should consider in developing standards to assess credit unions’ diversity policies and practices, credit unions’ views on developing or implementing a diversity program, and any current diversity initiatives that credit unions may already have in place (and whether such initiatives are successful). This is an excellent opportunity for credit unions to get involved in NCUA’s rulemaking efforts under Section 342, and to voice your opinion on this issue directly with NCUA before the agency proposes an Interpretive Ruling and Policy Statement. If your credit union is interested in participating in the roundtable discussion, please contact CUNA’s Deputy General Counsel Mary Dunn or Counsel for Special Projects Kristina Del Vecchio, by close of business today (February 17). We must provide NCUA with a list of interested credit unions by this Monday. NCUA will then contact those credit unions that are invited to participate, which will be limited to the first 10 responses the agency receives.

Financial Literacy and Education Commission Meeting

Earlier this week, staff attended the quarterly meeting of the Financial Literacy and Education Commission (FLEC), which is comprised of federal agencies, including the NCUA and CFPB. Treasury Assistant Secretary for Financial Institutions, Cyrus Amir-Mokri, and CFPB Director, Richard Cordray, provided introductory remarks to open the meeting. Cordray recalled several financial literacy efforts that he was a part of while in his previous role as the Ohio Attorney General, including his participation in implementing a mandatory financial literacy component into the state’s core curriculum for high school students. As the newest member of the FLEC, Cordray expressed his sincere encouragement and enthusiasm as he and the agency approach their work with the FLEC.

In addition, Chris Vein, Deputy Chief Technology Officer of the White House Office of Science and Technology Policy, moderated a discussion on the concept of “smart disclosure,” as described in a recent memo from the Administration to the heads of each federal agency and department. The following excerpt from the memo provides a concise summary of the concept of “smart disclosure.”

The term ‘smart disclosure’ refers to the timely release of complex information and data in standardized, machine readable formats in ways that enable consumers to make informed decisions. Smart disclosure will typically take the form of providing individual consumers of goods and services with direct access to relevant information and data sets. Such information might involve, for example, the range of costs associated with various products and services, including costs that might not otherwise be transparent. In some cases, agencies or third-party intermediaries may also create tools that use these data sets to provide services that support consumer decision- making. Such decision-making might be improved, for example, by informing consumers about the nature and effects of their own past decisions (including, for example, the costs and fees they have already incurred).

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