CUNA Regulatory Advocacy Report

Regulatory Advocacy Report: March 9, 2012

Here is our CUNA Regulatory Advocacy Report for the week of March 9, 2012. This issue includes several items on the Consumer Financial Protection Bureau (CFPB). I want to remind everyone that CFPB Director Cordray will be speaking at the CUNA Governmental Affairs Conference on March 19th and will be meeting with CUNA’s Executive Committee that same day. Later that week, the CUNA Executive Committee will meet with NCUA Board Chairman, Debbie Matz. We will report to you on both meetings.

  • CUNA Comments on CFPB Proposal on Regulatory Streamlining
  • CUNA Staff and Member Credit Unions Participate in Small Business Panel Discussion on RESPA/TILA Rulemaking
  • CFPB Flags Elder Financial Literacy and Protection
  • CFPB SAFE Act Examination Procedures
  • Insight into 2012 Additional Mortgage Rulemakings
  • Best Practices Guide for Responding to the Federal Reserve Board’s Debit Card Survey for Large Issuers

CUNA Comments on CFPB Proposal on Regulatory Streamlining

As I’ve discussed in several past reports, the CFPB has been seeking input on how it can streamline the regulations transferred to the Bureau under the Dodd-Frank Act. The CFPB has been delegated rulemaking authority for a number of consumer financial protection laws and has inherited from other federal agencies existing regulations implementing those laws. Earlier this week, we filed a comment letter with the Bureau to ensure it is aware that (1) regulatory burden is the primary concern of many credit unions, and (2) minimizing the number and complexity of costly regulatory requirements that divert credit unions’ time and economic resources from member service is the number one regulatory advocacy priority of CUNA.

We appreciate the general approach the CFPB has taken to rulemaking, although, as described in detail in our letter, we do have concerns with specific rules the Bureau has already implemented or has underway and we will continue to pursue those issues. Our letter urges the Bureau to not review each rule in isolation but rather review groups of rules that affect particular products. We believe the first group that should be reviewed is that of home-mortgage and related regulations, which include the regulations under the Truth-in-Lending Act, Real Estate Settlement Procedure Act, Home Mortgage Disclosure Act, SAFE Act, Equal Credit Opportunity Act, and Fair Credit Reporting Act.

We commend the CFPB’s approach to combining the TILA and RESPA forms, which we believe is an excellent approach that the CFPB and other agencies should replicate in future rulemakings. The agency has announced similar processes for credit card and student loan disclosures and we encourage the CFPB to include credit unions in its working groups on these issues. However, credit unions are deeply concerned about any new regulations, whether from the CFPB or other regulators, as emphasized in our comments to the agency. We will continue urging the Bureau to minimize any and all new requirements for credit unions.

CUNA Staff and Member Credit Unions Participate in Small Business Panel Discussion on RESPA/TILA Rulemaking

On Tuesday, the Consumer Financial Protection Bureau (CFPB) held a Small Business Regulatory Enforcement Act (SBREFA) panel discussion on the RESPA/TILA integration rulemaking, as required under the Dodd-Frank Act. CUNA members Bernie Winne, President and CEO of Boston Firefighter’s Credit Union, Lori Thompson, President and CEO of Premier Federal Credit Union and Jeanne Kucey, President and CEO of JetStream Federal Credit Union all participated on the SBREFA panel, and provided valuable input and discussion in response to inquiries from the CFPB. CUNA Senior Assistant General Counsel Jared Ihrig was also in attendance as a guest of Bernie Winne.

The SBREFA Act of 1996 requires the CFPB to form a Small Business Review Panel to seek input directly from small financial service providers for any proposed rule that may have a significant economic impact on a substantial number of small providers. The panel consists of representatives from the CFPB, the Chief Counsel for Advocacy of the Small Business Administration, and the Office of Management and Budget’s Office of Information and Regulatory Affairs. Other participants in Tuesday’s meeting included community banks, title companies, closing agents/attorneys, and mortgage brokers from across the country.

During the panel discussions, participants reviewed CFPB proposals under consideration, responded to discussion points drafted by the CFPB, provided supporting information, as available, and suggested alternatives where possible. Of the topics and proposals considered, here are some of the highlights:

  • The Loan Estimate would be required to be provided within 3 business days after application and would replace the early TIL and GFE;
  • The Settlement Disclosure would be required to be provided at least 3 business days before closing and would replace the final TIL and HUD-1;
  • The CFPB is considering a proposal that would amend the current definition of loan application to constitute receipt of: The borrower’s name, monthly income, social security number to obtain a credit report, property address, property value estimate, and loan amount. The proposal, however, would eliminate the current seventh element of the definition, which reads “any other information deemed necessary by the [lender or mortgage broker].”
  • When a lender provides a consumer with an estimate of the cost of its own services, the actual cost cannot be higher than the estimate unless there is a valid change in circumstances. The CFPB is considering a proposal to apply the same limitation to estimates of services provided by the lender’s affiliates or by companies the lender requires the consumer to use. In contrast, for services provided by a company over which the lender has less control, the proposed rule would leave in place the current 10% tolerance requirements. The proposal would reduce unnecessary compliance and confusion by addressing inconsistencies and ambiguities in the current requirements;
  • In connection with the Settlement Disclosure discussed above, the CFPB is considering two alternative approaches as to who must provide the disclosure. Under Alternative 1, the lender would be solely responsible for providing the integrated Settlement Disclosure to the borrower. Under Alternative 2, the lender would be responsible for the Truth in Lending Act-required information, and the settlement agent would be responsible for the Real Estate Settlement Procedures Act-required information. However, the lender and settlement agent would have shared responsibility for providing a single, completed Settlement Disclosure to the borrower;
  • The CFPB is also considering requiring that copies of all Loan Estimates and Settlement Disclosures provided to the borrower be maintained in a standard, machine-readable, electronic format. The retention period for any new requirements has yet to be determined, and the CFPB is considering exempting small entities from these requirements to reduce the burden on such entities. Importantly, CFPB staff clarified that “machine-readable” does not equate to electronic imaged documents, and stated that a lender would be required to determine what the closing fees were as stated on the Loan Estimate, and to compare to the closing costs as listed on the Settlement Disclosure, without a human comparing two imaged or electronic documents;
  • The CFPB is considering including in the calculation of the Annual Percentage Rate (APR) some common loan charges that are currently excluded from the calculation. These fees would include such items that are currently excludable as real estate related fees for mortgages, and would include such items as escrows and taxes;
  • The CFPB also sought input from Panel participants with respect to any potential increase in the cost of credit for small entities that would result from the proposals under consideration, and on alternatives that minimize such increases. The proposals under consideration would apply only to closed-end mortgage loans that are primarily for personal, family or household purposes, and would not apply to loans obtained primarily for business purposes.

Credit Union Panel participants discussed their concern over the “Total Interest Percentage” and “Lender’s Cost of Funds” disclosure items currently reflected on the prototype Settlement Disclosure, and concerns were also mentioned surrounding the possible amendment of the “loan application” definition, stating that many lenders also collect a purchase agreement/contract, learn of the specifically desired loan product, and down payment amounts as part of the loan application process prior to issuing a GFE. Additionally, all three credit union Panel participants reiterated the need for a lengthy implementation period of at least 12 to 18 months with respect to any rulemaking that is eventually promulgated by the CFPB in this area. Participants generally raised the concern of the proposed timing of the delivery for the Settlement Statement, sharing opinions that 3 business days was “unworkable” for most small entities. Finally, CUNA and many credit unions are also concerned about the possible expansion of the APR to include fees which are currently excludable from the finance charge and the corresponding APR under current rules.

The CFPB indicated that it intends to issue a proposed rule on the RESPA/TILA combination project in July of this year. CUNA will be following up with the CFPB on many of these points between now and then, and would welcome feedback from leagues and credit unions on the aspects under consideration as listed above. For more information on the proposals under consideration, please click here and here.

CFPB Flags Elder Financial Literacy and Protection

Next week, I and CUNA senior staff will be meeting with Mr. Hubert (“Skip”) Humphrey, Assistant Director of the Office for Older Americans at the Consumer Financial Protection Bureau (CFPB). We and the League of Southeastern Credit Unions have been working with the CFPB to include credit unions in a Town Hall meeting on March 20th in Miami on protecting older Americans from financial abuses. I know most of you will be here for the CUNA GAC, but it is important that some credit union representatives were invited to participate in the Miami meeting. The issue of protection for older Americans is a priority for the CFPB and we will update you next week on our meeting with Mr. Humphrey and his staff.

CFPB SAFE Act Examination Procedures

Yesterday, the CFPB published its SAFE Act Examination Procedures. This new information is in addition to the already published Mortgage Origination Examination Procedures and the overall Examination Manual published by the CFPB earlier this year, and late last year, respectively.

Insight into 2012 Additional Mortgage Rulemakings

Also on Tuesday, Director Cordray delivered remarks to the National Association of Attorneys General here in Washington. While a majority of his remarks were reflective of the CFPB’s projects I’ve already mentioned to you in the last year, his speech gives us some additional information that I would like to share with you about upcoming rulemakings we can expect to impact credit unions during 2012: “Over the next year, the Consumer Bureau will be putting in place new mortgage rules to protect consumers. We will be issuing a rule requiring mortgage servicers to provide consumers with better information in their billing statements. We will also be issuing rules on ‘force-placed insurance’ to prevent servicers from charging for this product unless there is a reasonable basis to believe that borrowers have failed to maintain their own insurance. And we will issue new rules around hybrid, adjustable-rate mortgages. Consumers will be notified months ahead of their first interest rate adjustment and they will receive a disclosure of their new monthly payment, along with any available options to head off the higher interest rate, such as refinancing and renegotiation of loan terms.”

CUNA will be following the CFPB’s activities in the mortgage rule writing area closely in the coming months, and we will continue to provide you with information on these upcoming rulemakings as we learn more details.

Best Practices Guide for Responding to the Federal Reserve Board’s Debit Card Survey for Large Issuers

CUNA has been working with a consortium of trade associations, led by The Clearing House Association LLC (the “Group”), to launch a project to coordinate consistent and complete responses to the Federal Reserve Board’s (“Board”) Debit Card Issuer Survey (the “Survey”) for large issuers with over $10 billion in assets, pursuant to the Dodd-Frank Act. Survey results are due to the Board by April 16, 2012. The goals of the Group’s project are to facilitate meaningful data aggregation and ensure that all responses are adequately considered by the Board. In furtherance of this project, the Group has submitted and discussed follow-up questions about the Survey with the Board regarding how to respond to the Survey questions and the breath data the Board wants to collect in response to certain questions. After its discussions with the Board, the Group put together a “Best Practices” guide for issuers to use as they respond to the Board’s Survey, which explains how issuers should treat the Survey questions. The Best Practices guide can be found here.


With all these issues, we will pursue credit unions? regulatory interests to the greatest extent possible. In the meantime, if you have any questions or comments about this report, please feel free to contact Mary Dunn, Bill Hampel, or me.

Best regards,

Bill Cheney

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