NWCUA Regulatory Advocacy Update: Association Comments on Use of Derivatives and Remittance Transfers

Association Comments on Use of Derivatives and Remittance Transfers

The National Credit Union Administration (NCUA) issued a second advance notice of proposed rulemaking (ANPR) on expanding the use of derivatives for credit unions to help offset interest rate risk (IRR). The Northwest Credit Union Association (NWCUA) wrote in support of expanding access.

“Now, more than ever, credit unions need the flexibility and tools to manage their balance sheets and serve their members in a changing economy. The Association believes that more credit unions should be able to engage in derivatives as a tool to manage IRR, and we applaud the NCUA for continuing to move this rulemaking process forward.”

The Association emphasized the need for the NCUA to put forward a proposal with significant flexibility for credit unions and asked that many of the details and limits for credit unions be decided by their own boards.

“The rule should allow a well-run credit union that has existing IRR or forecasted exposure on its books to receive independent authority. To participate in the program, credit unions should demonstrate the ability to manage the activity, including adequate levels of financial performance, expertise and experience. It is difficult to quantify these levels because of the individual nature of credit unions, membership and activities. Parameters should be broadly established so that credit unions and their boards can establish programs appropriate for their level and type of activity.”

“Derivatives could be a valuable tool for many credit unions, and we want to ensure that NCUA’s next step, which would likely be a regulatory proposal, be broad enough to allow many credit unions to participate while still ensuring safety and soundness,” said NWCUA Director of Regulatory Advocacy Jaycee Winn.

The Association also commented on a proposal from the Consumer Financial Protection Bureau (CFPB) that would augment the bureau’s final rule on remittance transfers issued in January 2012. The proposal, which was issued at the same time as the final rule, sought input on a potential “safe harbor,” establishing a cap on remittance transfers under which an institution would not have to comply with the new rule. The proposal also took a second look at preauthorized transactions.

The final rule as issued was very similar to the proposed rule issued last year and seemed to take into account very few of the suggestions submitted by those who commented. The Association once again urged the CFPB to exempt those institutions using “open networks” rather than the closed networks used by those whose main business is remittances.

“We continue to believe that the strict requirements placed on providers of remittance transfers for those not offering this product in the normal course of business would force many credit unions out of providing this service, narrowing the marketplace and discontinuing a valuable service to members,” the Association wrote in its comment letter.

“The compliance burden and cost of providing these services would surely price many credit unions out of the market. While we appreciate the efforts by the Bureau to create a safe harbor for institutions that do not provide remittance transfers in the ‘normal course of business,’ we believe that the final rule is far too severe and even with the proposed safe harbor, will inhibit the ability of credit unions and small institutions to offer remittance services to members.”

Ultimately, the NWCUA requested that the CFPB exempt credit unions and those providing remittance transfers as a service through open networks from this rule.

“We ask that the Bureau consider exempting open networks from its final rule. If the Bureau will not exempt open networks we would ask that it consider a separate set of rules addressing this unique group of service providers which do not offer remittance transfers as a primary business practice. Finally, should the Bureau not take either of these steps we would request it increase the safe harbor to 1,000 transfers annually and extend the implementation date to at least January 2014 to allow credit unions and small providers to prepare for the necessary, extensive and costly changes.”

“We hope that the Bureau will take into account the very real impact such a proposal could have on credit unions and their ability to offer this service to members,” Winn said.

Read proposals and responses on the NWCUA’s Comment Archive page.

CFPB Looks at Mortgage Servicing

The CFPB will look at mortgage servicing rules over the next few months with plans to issue proposed rules this summer and final rules in early 2013. The bureau cites confusion for consumers around “what you owe and to whom you should make your payments, understanding changes to your interest rate, and knowing how to get help are important questions that deserve well-considered answers,” and aims to help make the process more transparent.

The Bureau stated:

“The proposed rules currently under consideration aim to protect consumers from surprises by directing servicers to provide:

  • Clear monthly mortgage statements that explicitly breakdown principal, interest, fees, escrow, and due dates
  • Warnings before adjusting interest rates on certain adjustable rate mortgages (ARMs) that explain how the new rate was determined, when it will take effect, dates of future adjustments, and a list of alternatives for consumers to consider
  • Options for avoiding expensive ‘forced-placed’ insurance, which is insurance charged to borrowers by servicers when their existing insurance appears to have lapsed
  • Early outreach to struggling borrowers that informs them of potential options to avoid foreclosure

We also want to address the issue of consumers getting the ‘run-around’ when dealing with servicers. To accomplish this, the Bureau is considering proposals that would require:

  • Payments to be credited to consumer accounts the day payment is received
  • Implementing new policies and procedures so that records are kept up-to-date and accessible
  • Quickly addressing and correcting errors
  • Giving homeowners direct and ongoing access to servicer staff members who have access to the homeowners’ records and can actually help address their issue(s)”

“The Association agrees that consumers need to have every advantage to understand the mortgage and mortgage servicing process,” Winn said. “We will continue to monitor this process to ensure that credit unions are not placed in a position of increased regulatory and compliance burden. A balance must be struck.”

Read more about the CFPB effort here.

Important Comment Periods Ending Soon                 

Agencies have been issuing proposals and requests for comments in a steady stream. Some of the key proposals with looming deadlines include:

  • CFPB – Impacts of Overdraft Programs on Consumers (closes April 30)
  • CFPB – Regulatory Streamlining, Comment on the Comments (closes June 4)
  • NCUA – 2012 Regulatory Review (closes August 3)

To read more about the key proposals open for comment, visit the NWCUA Regulatory Advocacy page.


The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions on these or any regulatory issues, please contact Director of Regulatory Advocacy Jaycee Winn at jwinn@nwcua.org, or at 800.995.9064 x209.

Posted in Advocacy News, NCUA, NWCUA.