CUNA Regulatory Advocacy Report

CUNA Regulatory Advocacy Report: March 30, 2012

Good afternoon. Last week was a whirlwind with the CUNA Governmental Affairs Conference and there is much to update you on in this report, including important meetings that CUNA’s Executive Committee had with NCUA Board Chairman Debbie Matz and Consumer Financial Protection Bureau Director Richard Corday.

  • CUNA Executive Committee Meets with NCUA Board Chairman Matz and CUNA’s Follow-up Letter; NCUA Takes Steps to Address Reg and Exam Issues
  • CUNA Executive Committee Meets with CFPB Director Cordray
  • CUNA Joins Leagues and Others in Submitting Nominations to the CFPB
  • Update on CFPB Mortgage-Related Efforts
  • CUNA Meets with SBA’s Office of Advocacy to Discuss New and Upcoming Rules
  • FTC Report on Privacy Best Practices Framework
  • CUNA asks NCUA to Limit Dodd-Frank Section 342 Standards to EEOC
  • Reporting Requirements
  • CUNA Submits Comments regarding HUD’s Proposed Risk Management
  • Initiative Revising Seller Concessions
  • Senate Confirms Tom Curry as New Head of OCC


CUNA Executive Committee Meets with NCUA Board Chairman Matz and CUNA’s Follow-up Letter; NCUA Takes Steps to Address Reg and Exam Issues

On Wednesday of last week, as the CUNA Governmental Affairs Conference was beginning to wind down, CUNA’s Executive Committee sat down with NCUA Board Chairman Debbie Matz and her senior staff to have a candid discussion on regulatory and examination issues affecting credit unions. CUNA participants felt the meeting was useful and productive as a good step in the right direction of improving the regulatory and examination environment for credit unions.

Much work remains to be done before a number of credit unions begin to feel that much has improved with the regulator. That is why CUNA’s discussions with NCUA focused on key areas of concerns that credit unions consistently raise with us and urge us to help address – regulatory burdens and examination problems.

During the conversation, CUNA reiterated a number of concerns with the agency, such as specific objections to the NCUA pending proposals on Credit Union Service Organizations and loan participations, examiner practices and overregulation generally.

Chairman Matz reemphasized that the agency is reviewing the proposals on CUSOs and loan participations and is working on changes to the proposals in light of the universal objections the agency received, including from CUNA and leagues. She indicated that other than proposals in the pipeline already, additional regulations are not planned for 2012 (barring a new, material safety and soundness issue).

She also revealed that NCUA is reviewing its approach toward examinations and that NCUA Examination and Insurance Director Larry Fazio will be heading up this project. CUNA’s Examination and Supervision Subcommittee met with Mr. Fazio during the GAC to discuss examination issues at length and offer recommendations for improvement, such as requiring examiners to provide the legal authority for directives, particularly those that seem arbitrary.

Just today, I have sent a follow-up letter to Chairman Matz. It reinforces credit unions’ examination and regulatory concerns and offers concrete recommendations to address these concerns, such as improving the examination process and reconsidering whether any new rules are needed for the foreseeable future.

CUNA is also urging NCUA to review field of membership issues, including key definitions such as ?rural district? and member business loan regulatory provisions to facilitate more lending to small businesses.

I will be discussing these matters with Chairman Matz again shortly and the CUNA Executive Committee plans to meet with her on a regular basis in 2012 and beyond.

CUNA Executive Committee Meets with CFPB Director Cordray

In another productive session last week, CUNA’s Executive Committee met with Consumer Financial Protection Bureau Director Richard Cordray, following his speech to the CUNA GAC.

The CUNA group reiterated concerns about new regulations from the CFPB. The fear of the unknown – how many new regulatory burdens will be imposed on credit unions as a result of the CFPB’s work – was a key point emphasized.

He reiterated that the agency does not want to burden credit unions, which he praised for serving their members and communities well. Nonetheless, the new CFPB remittances regulation has raised concerns from a number of financial institutions, including credit unions. The director noted that a new proposal to provide some relief has been issued (comments are due April 9, 2012) and urged CUNA to provide recommendations for improvements. The group also highlighted a number of regulations required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), particularly in the area of mortgage lending, which have yet to be issued.

The group revisited several other issues that have already been flagged to the CFPB: eliminating annual privacy notices; removing the requirement for redundant fee notices on the outside of ATMs, and allowing credit unions flexibility in dealing with their members on issues relating to overdraft protection.

The director said he wanted to work with credit unions, CUNA, and the leagues to address credit unions’ concerns. He specifically asked for CUNA’s legal analysis on how the agency could exempt institutions from outside ATM disclosures. As encouraged by the director, CUNA is following up with him and his senior staff on all these issues.

CUNA Joins Leagues and Others in Submitting Nominations to the CFPB

CUNA is today submitting its recommendations to the CFPB for membership on the agency’s Consumer Advisory Board; this is the last day for nominations. This board will consist of experts the agency will meet with to seek guidance on emerging trends and practices in the financial services and products industry. We will provide a link to the letter in our next Regulatory Advocacy report.

The CFPB is forming a separate Credit Union Advisory Council, as we have also mentioned. We will be in touch shortly on nominations for that council.

Update on CFPB Mortgage-Related Efforts

In our March 2 Regulatory Advocacy Report, I mentioned some particular items of concern that the CFPB is considering regarding its RESPA/TILA Know Before You Owe mortgage disclosure combination project. CUNA Senior staff has been in constant contact with the CFPB on this issue, and we will be drafting a comment letter on the issues outlined in this document which was released by the CFPB last month. Because these potential changes could change the landscape for mortgage lending in credit unions, we would like to hear from you with any comments you may have concerning the CFPB’s approach in this area. Please feel free to email CUNA’s Deputy General Counsel Mary Dunn or Senior Assistant General Counsel Jared Ihrig by April 4 to weigh in on this important issue.

Also, earlier this week, Raj Date, the Deputy Director of the CFPB, and Peter Carroll, acting Assistant Director for the CFPB’s Office of Mortgage Markets addressed a symposium hosted by the Women in Housing and Finance here in Washington. He indicated that the CFPB is expected to release its long-awaited Ability to Repay final rule by the end of June that would require lenders to verify a borrower’s ability to repay a mortgage, unless they make a loan that falls under the definition of a “qualified mortgage.”  Date mentioned that the CFPB’s immediate rulemaking priorities are focused on the mortgage market for 2012. Those include the integration of mortgage disclosure forms, development of national servicing standards, new disclosure requirements for monthly mortgage statements, notices regarding hazard insurance and force-placed insurance, new requirements related to escrow accounts and error resolution practices, all of which are due by January 2013. Carroll mentioned that all of these rulemaking efforts are underway right now, and that the CFPB is “in the process of working on proposed rules.”  The Bureau is also working on rules related to adjustable rate mortgages, appraiser independence compensation, mortgage loan originator compensation and new requirements under the Dodd-Frank Act for the Home Mortgage Disclosure Act.

In other areas, CUNA staff has been invited to attend a meeting at the CFPB’s headquarters in Washington concerning the Bureau’s rulemaking efforts surrounding the Home Ownership and Equity Protection Act (HOEPA) amendments made to the Truth in Lending Act by Dodd-Frank, and under the auspices of CUNA’s Consumer Protection Subcommittee, we will be reaching out to credit unions and Leagues soon to gain additional data and insight concerning credit union overdraft and overdraft protection practices, as the CFPB is seeking comments by April 30 on this important issue, as well.

CUNA is continuing to follow these and other regulatory developments with the CFPB, working in close connection with CUNA’s Consumer Protection Subcommittee on these and other issues to urge the CFPB to reduce the regulatory burden on credit unions, and we will keep you apprised of additional details as they may arise.

CUNA Meets with SBA’s Office of Advocacy to Discuss New and Upcoming Rules

Last week, we met with the Small Business Administration’s Office of Advocacy to discuss several new and upcoming rules and their potential impact on small businesses, including credit unions. The primary issues discussed were the recent SBREFA (Small Business Regulatory Enforcement Fairness Act) panel on upcoming changes by the CFPB to the RESPA/TILA disclosures, the CFPB’s proposed rule to define “larger participants”, and the CFPB’s proposed rule regarding a safe harbor from the requirements of its recently finalized remittances rule. The Office of Advocacy monitors federal agencies’ compliance with the Regulatory Flexibility Act, as well as raises concerns of small business before Congress, the White House, and federal agencies. In addition, the Office of Advocacy advocates—when appropriate—for agencies to convene SBREFA panels; these panels are intended to:
(1) ensure that affected small entities are consulted about the pending action (e.g. a proposed rule) and offered an opportunity to provide information on its potential effects, (2) develop and recommend less burdensome alternatives, and (3) provide input from both real world small entities and the panels’ report and analysis prior to publication of the rule as final. As discussed in a previous Regulatory Report, CUNA was represented at the RESPA/TILA SBREFA panel held earlier this month.

We also discussed with the Office of Advocacy the CFPB’s proposed safe harbor from its remittances rule and the agency’s ?larger participant? proposal, and whether the Office should advocate for a SBREFA panel on either or both of these proposals. CUNA voiced the concerns of credit unions with regard to the CFPB’s new remittances final rule, including that the proposed safe harbor threshold must permit an adequate number of remittance transfers in order to provide meaningful relief to credit unions. Regardless of whether the Office of Advocacy decides to advocate for a SBREFA panel on the proposed remittances safe harbor, CUNA will be filing a comment letter with the CFPB stating our position regarding a safe harbor threshold.

See our Regulatory Comment Call for additional information on the proposal and please direct your concerns or questions to Regulatory Advocacy staff.
FTC Report on Privacy Best Practices Framework

Earlier this week, the FTC issued a report on a privacy best practices framework for businesses, entitled, “Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers.”  The report provides recommendations regarding privacy issues and disclosures related to the use of consumer information. The report also covered existing privacy laws and regulations, building privacy protections into products, data collection and use of consumer data, and transparency. Regarding the scope of the report, the FTC excluded companies that collect only non-sensitive data from fewer than 5,000 consumers a year, provided they do not share the data with third parties. Further, FTC provided recommendations to Congress and other policymakers on these five areas: 1) Do Not Track, 2) Mobile, 3) Data Brokers, 4) Large Platform Providers, and 5) Promoting Enforceable Self-Regulatory Codes. On May 30, 2012, the FTC will host a workshop to address how mobile privacy disclosures can be short, effective, and accessible to consumers on small screens. CUNA continues to monitor developments in privacy and disclosures and the potential effects on credit unions, including with consumer protection and mobile payments.

CUNA asks NCUA to Limit Dodd-Frank Section 342 Standards to EEOC Reporting Requirements

On March 26, CUNA sent a letter to NCUA setting forth CUNA and its members’ concerns regarding NCUA’s planned implementation of standards under Section 342 of the Dodd-Frank Act. CUNA stated that it understands that NCUA is obliged under Section 342(b)(2)(c) to develop standards for “assessing the diversity policies and practices of entities regulated by the agency.” However, CUNA urged that NCUA, through its Office of Minority and Women Inclusion (OMWI) implement such standards in a manner that would minimize the information gathering and reporting burden on credit unions. CUNA commended NCUA in its efforts thus far in working towards developing these standards, and is pleased that CUNA members were invited to participate in NCUA’s first roundtable discussion on February 29. In the letter, CUNA and its members urged OMWI to carefully consider the challenges credit unions face in complying with any standards that NCUA will develop under Section 342, especially relating to the difficulties involved in manually gathering diversity related data from employees, contractors, and suppliers. Although manually gathering such information could be complicated for most credit unions, it will be especially difficult for credit unions that do not already report employee-related data to the Equal Employment Opportunity Commission (EEOC) and/or credit unions with employees that are not directly employed by the credit union, but are instead employees of an affiliated non-credit union entity. CUNA also expressed concern that OMWI’s diversity-related assessments could lead to additional and unnecessary burdens for credit unions. CUNA reminded OMWI in the letter that Section 342 specifically prohibits NCUA or OMWI from “requir[ing] any specific action based on the findings of the assessment.” This means that NCUA and OMWI may only collect data, but may not—under the language of the statute as currently written—require credit unions to implement any specific diversity-related policies or practices at their credit unions. CUNA urged NCUA to carefully consider how any standards implemented under Section 342 will affect credit unions’ already onerous compliance obligations. Accordingly, CUNA asked NCUA to limit any Section 342 assessment standards to collecting employment-related data from credit unions that are subject to EEOC reporting requirements. CUNA noted that we understand this is the approach NCUA currently plans to take, and would be pleased with such outcome.

CUNA Submits Comments regarding HUD’s Proposed Risk Management Initiative Revising Seller Concessions

CUNA filed a comment letter on March 26 regarding HUD’s proposal to limit the amount of closing costs a seller may pay on behalf of a homebuyer purchasing a home with financing insured by the Federal Housing Administration (FHA). HUD previously sought and received comments on this proposal on July 15, 2010, as one of three initiatives proposed to help restore the Mutual Mortgage Insurance Fund (MMIF) capital reserve account. CUNA submitted a comment letter on August 16, 2010 on HUD’s previous proposal, supporting HUD’s initiative to reduce the amount of the buyer’s closing costs that may be paid by the seller from 6% to 3% of the purchase price of the home. At the time, CUNA commented that this would be consistent with the industry standard. CUNA also supported the change as a way to require a more serious commitment from borrowers and to help reduce risks to the MMIF. CUNA reiterates its previous comments, supporting HUD’s proposal to institute a cap of $6,000 or 3%, whichever is greater, on the concessions a seller may pay on behalf of a homebuyer in purchasing a home insured by FHA. CUNA supports including a $6,000 dollar limit as an alternative to a 3% cap to avoid the possibility that the 3% cap could have a disproportionately negative impact on borrowers with low and moderate incomes who are purchasing moderately priced homes. CUNA also supports HUD’s proposed narrowing of the definition of acceptable concessions to the following: (a) the borrower’s actual costs to close on the loan, (b) the up-front mortgage insurance premium due on the loan, and (c) an interest rate buydown.

Senate Confirms Tom Curry as New Head of OCC

Yesterday, the Senate confirmed President Obama’s nomination of Tom Curry as the new Comptroller of the Currency, replacing acting director John Walsh. Curry, a former Massachusetts Banking Commissioner, has served as a member of the Board of Directors of the Federal Deposit Insurance Corporation since 2004. Curry’s previous experience includes chairman of the Conference of State Bank Supervisors, as well as chairman of the State Liaison Committee of the Federal Financial Institutions Examination Council.

Today’s Wall Street Journal opined that, “The views of Mr. Curry, a former Massachusetts banking regulator, on specific Dodd-Frank rules is an unknown but in general he isn’t expected to be as a fierce an advocate for banks as Mr. Walsh.”  Even though the OCC regulates the country’s largest banks, we are interested in this new appointment and will report any interesting developments.


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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