CUNA Regulatory Advocacy Report
September 18, 2012
Good afternoon. Another busy week is concluding and we want to bring you up to date on some of the key regulatory advocacy issues that we have been following.
- CFPB Names Credit Union Advisory Council
- CUNA Urges CFPB to Craft Qualified Mortgage Final Rule Carefully
- NCUA’s Office of Inspector General’s Report on NCUA’s Exam and Complaint Processes
- CFPB Announces Consumer Advisory Board
- CFPB’s Director Cordray Testifies before Senate Banking Committee
- FHFA, Fannie Mae & Freddie Mac Announce New Representation & Warranty Framework
- GAO Says Too Early to Tell on the Impact of Dodd-Frank; NCUA Defends Safety and Soundness of MBLs to GAO
- FedGlobal ACH Update on the CFPB Remittance Transfers Final Rule
- FinCEN Summary of Customer Due Diligence Proposal Hearing
- FTC Guide on Advertising and Privacy for Mobile Applications
CFPB Names Credit Union Advisory Council
While not required by law, the Consumer Financial Protection Bureau (CFPB) has appointed a Credit Union Advisory Council (CUAC), a move CUNA has urged the agency to take since it was first established in July 2011. CUNA and leagues support the list selected:
Credit Union Advisory Council Members:
Bernard Balsis, IEG Federal Credit Union, Hawaii
Rose Bartolomucci, Towpath Credit Union, Ohio
Gary Bell, Cooperative Federal Credit Union, California
John Buckley, Gerber Federal Credit Union, Michigan
Carla Decker, District Government Employees Federal Credit Union, Washington, D.C.
Ron Ehrenreich, Syracuse Cooperative Federal Credit Union, N.Y.
Kevin Foster-Keddie, Washington State Employees Credit Union, Washington
Mitchell Klein, Police and Firemen Federal Credit Union, Pennsylvania
Lily Lo, Northeast Community Federal Credit Union, California
Maria Martinez, Border Federal Credit Union, Texas
Marcus Schaefer, Truliant Federal Credit Union, North Carolina
Camille Shillenn, Unified People’s Credit Union, Wyoming
Helen Godfrey Smith, Shreveport Federal Credit Union, Louisiana
Gregg Stockdale, 1st Valley Credit Union, California
David Wright, Services Center Federal Credit Union, South Dakota
Several of these individuals are currently serving on CUNA Committees and others have served recently. Rose Bartolomucci is a member of CUNA’s State Issues Subcommittee, Ron Ehrenreich, is a member of CUNA’s Consumer Protection Subcommittee, Marc Schaefer, is a member of CUNA’s World Leadership Committee, and Maria Martinez, is a member of CUNA’s Hispanic Outreach Committee. CUNA also worked recently with Carla Decker, a former nominee to the National Credit Union Administration Board.
The purpose of the Council is to “advise generally on the Bureau’s regulation of consumer financial products or services and other topics assigned to it by the Director…[and] the scope of its activities shall include providing information, analysis and recommendations to the Bureau,” according to the Charter of the CUAC. The total number of members will be at least 15 and no more than 20. Members will serve for a two-year term and cannot succeed themselves. Members will not be compensated or reimbursed for expenses. Meetings will not be held in public; four meetings a year are anticipated, with two of them at the CFPB’s headquarters in Washington, DC.
CUNA is in the process of contacting the Council members to offer our assistance and we want to work closely with them, in coordination with the leagues.
CUNA Urges CFPB to Craft Qualified Mortgage Final Rule Carefully
This morning, CUNA, along with other financial trade associations, sent a letter to Director Cordray and the CFPB on regarding the Qualified Mortgage requirements under the Bureau’s pending Ability to Repay Rule. In the letter, we urged the agency to broadly define the Qualified Mortgage definition, and to provide a legal safe harbor for mortgage lenders from ability to repay litigation when they originate loans that meet the Qualified Mortgage standards. We also urged the Bureau to develop objective, bright line standards for this purpose. As the agency works to finalize the rule, which is required to be published by January of next year, we want to ensure that the CFPB crafts the final rule in a manner by which credit unions are able to serve the widest array of qualified borrowers with affordable credit as possible. For a copy of the letter, click here.
NCUA’s Office of Inspector General’s Report on NCUA’s Exam and Complaint Processes
The Office of Inspector General (OIG) at the National Credit Union Administration has issued a report on the agency’s examination and complaint processes. The report was requested by Chairman of the Senate Banking Committee Tim Johnson (D-SD). Senator Johnson requested the study of “small” institutions and a similar request was sent to the OIG at Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation. The existence of the OIG is required by statute and is independent of the agency in which it is housed. The report of the NCUA OIG included natural person credit unions with assets of $1 billion or less, which is 97% of all federally insured credit unions.
According to the report, the NCUA OIG focused on NCUA’s examination process and the ability of insured credit unions to question examination results. It does not appear that any credit union was questioned or consulted in preparing the report. Instead , the NCUA OIG interviewed and obtained documentation from the NCUA Office of Executive Director (Dave Marquis), the Office of Examination and Insurance (Larry Fazio), the Office of Consumer Protection (Kent Buckham), and Office of General Counsel (Mike McKenna) and each of NCUA’s five regional offices. The OIG said it also reviewed agency “policies and procedures” relating to examinations and processes for credit unions to lodge complaints about their examiner or examination. The OIG coordinated with the other agencies subject to the Senate Banking Committee’s request.
Here are key findings from the report:
- The NCUA OIG said NCUA’s examination process has “clear standards and policies” to conduct examinations.
- The report said, though, that there are “inconsistencies in the manner in which NCUA carries out procedures to implement it policies.”
- The OIG did not make recommendations regarding those inconsistencies, however, because it says the NCUA National Supervision Policy Manual, introduced to examiners in April, addressed the inconsistences. CUNA has requested that the manual be available to credit unions; the agency has not released it to credit unions yet but we anticipate sections of the manual will be accessible shortly.
- The report said NCUA has an “adequate appeals process.”
- However, the report found that NCUA does not keep statistical information on informal examination complaints and has no written guidance that regional offices should keep statistics on their determinations.
- The report said that based on correspondence logs in the regions, the regions handle on average six exam-related complaints annually (does that seem really low to anyone?) and 85% of them are resolved in favor of NCUA (the only surprise there is that the percentage is not higher.)
- The OIG recommended that NCUA set up a national reporting requirement that each regional office provide to the Office of Examination and Insurance specific details on disputed examination issues that are brought by a credit union to the Regional Director.
- The report also addressed the agency’s Supervisory Review Committee (SRC), which is also required by statute. The report says the SRC handles material supervisory determinations. Two appeals were received during the period of the OIG’s review, one in 2009 and one in 2010 and both were upheld.
- The report found that the “SRC’s record keeping is in need of significant improvement” and recommended that an electronic system of records for all SRC related activities be developed and maintained.
In addition, the report also looked at the NCUA’s Ombudsman, which is created by statute. The Ombudsman’s duties include following up on SRC decisions in an effort to police any retaliation, addressing external complaints of a regulatory nature, and referring complaints outside the Ombudsman’s jurisdiction to the appropriate agency officials.
The report notes that the Ombudsman, according to agency policy, is supposed to be reporting to the NCUA Board Chairman but has not done so. The report recommends that the reporting structure of the Ombudsman be changed to ensure the position reports to the Chairman or to the Board.
CUNA has a number of concerns about the report’s findings. The report indicates that there are many issues that need to be addressed at the agency regarding examinations, such as clarifying and improving the appeals process, the role of the Ombudsman and ensuring that examination standards are clear and transparent. CUNA will be following-up on this report after our Examination and Supervision Subcommittee reviews it in detail.
In the meantime, please let us hear from you on your reaction to this report. Specific examples you can provide regarding examination issues or concerns, or difficulties in appealing an examination directive or finding would be very useful. Please email them to CUNA Deputy General Counsel Mary Dunn.
CFPB Announces Consumer Advisory Board
Section 1014 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Consumer Financial Protection Bureau (CFPB) to establish a Consumer Advisory Board (CAB). Earlier this week, the CFPB announced its selections, which include two credit union officials, Bill Bynum, CEO of Hope Enterprise Corp., MS, and Laura Castro de Cortes, Vice President of Alternative Financial Services, Centris FCU, NE. The full list of the 25-member board is below; the list includes mostly consumer activists but three former regulators (former Office of Thrift Supervision, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation), a judge and three academicians have also been named. We have worked with a number of the board members before on various issues. (See item above on the new Credit Union Advisory Council.)
The role of the CAB is “to advise and consult with the Bureau in the exercise of its functions under the Federal consumer financial laws, and to provide information on emerging practices in the consumer financial products or service industry including regional trends, concerns and other information.” At least six of the members have to be appointed based on recommendations of the regional Federal Reserve Bank Presidents. Members will generally have staggered three year terms, and can succeed themselves for another term if selected by the CFPB.
The CAB will meet twice a year and members of the Board, who are not full time federal government employees, will be compensated for attending the meetings and reimbursed for travel expenses.
Under the Charter of the CAB, meetings will be accessible to the public, although the CFPB may close any of the meetings. The Act does not require the meetings to be held in public. The first meeting will be in St. Louis, MO, September 27 and 28. CUNA supports the inclusion of these credit union officials on the CAB and anticipates working closely with them on CFPB related issues throughout their terms. We will also be reaching out to other members of the CAB to help ensure they understand the impact of the CFPB’s regulations and decisions on credit unions. The CFPB has also named an Academic Research Council and we will be contacting a number of them as well to provide information about credit unions.
Consumer Advisory Board
Chairperson: Jose Quinonez, Executive Director, Mission Asset Fund, San Francisco, CA
Vice Chairperson: Bill Bynum, CEO, Hope Enterprise Corp., Jackson, MS
Gary Acosta, Co-Founder, National Association of Hispanic Real Estate Professionals, San Diego, CA
Jo Ann Barefoot, Co-Chair, Treliant Risk Advisors, Washington, D.C.
Don Baylor, Senior Policy Analyst for Economic Opportunity
Center for Public Policy Priorities, Austin, TX
Maeve Brown, Executive Director, Housing and Economic Rights Advocates, Oakland, CA
Steve Carlson, Head of Marketing, Mint.com, Mountainview, CA
Laura Castro de Cortes, Vice President of Alternative Financial Services, Centris Federal Credit Union, Omaha, NE
Elizabeth Costle, Director of Consumer and State Affairs, AARP Public Policy Institute, Washington, D.C.
Prentiss Cox, Associate Professor of Law, University of Minnesota, Minneapolis, MN
Patricia Duarte, Director, Neighborood Housing Services of Phoenix, Phoenix, AZ
Patricia Hasson, President, Clarifi, Philadelphia, PA
Adam Levitin, Professor of Law, Georgetown Law School, Washington, D.C.
James McCarthy, President/CEO, Miami Valley Fair Housing Center, Dayton, OH
Jennifer Mishory, Deputy Director, Young Invincibles, Washington, D.C.
William Nelson, Executive Director, USA Cares, Radcliffe, KY
Michelle Peluso, Global Consumer Chief Marketing and Internet Officer, Citigroup, New York, N.Y.
Dory Rand, President, Woodstock Institute, Chicago, IL
Annette Rizzo, Judge, First Judicial District of Pennsylvania, Philadelphia, PA
Ellen Seidman, Chair, Board of Directors of the Center for Financial Services Innovation, Washington, D.C.
Josh Silverman, President for U.S. Consumer Services, American Express, New York, N.Y.
Robert Stoll, Founder, Stoll Berne LLC, Portland, OR
Donna Tanoue, Vice Chairman, Bank of Hawaii, Honolulu, HI
Jane Thompson, CEO and Founder, Jane J. Thompson LLC, Lake Forest, IL
Jonathan Zinman, Associate Professor, Dartmouth College, Hanover, NH
CFPB’s Director Cordray Testifies before Senate Banking Committee
Yesterday, CFPB Director Richard Cordray testified before the Senate Banking Committee on the agency’s semi-annual report. While many on the Committee were supportive of Director Cordray and the agency’s progress to date, Senator Richard Shelby (R-AL) expressed strong concerns regarding what he viewed as the CFPB ignoring or attempting to re-write the law (the Dodd-Frank Act) in utilizing its exemption and modification authority under the Truth in Lending Act and other provisions of the Dodd-Frank Act. Director Cordray responded that the Bureau “cannot ignore or re-write” the laws that Congress mandates, but indicated that where appropriate, the agency intends to use its exemption authority to potentially exempt certain smaller institutions such as community banks and credit unions from certain regulatory provisions “where they don’t make sense.”
On numerous occasions, CUNA has met with Director Cordray and urged that the Bureau do more by way of rulemaking to not place further regulatory burdens upon credit unions, and Director Cordray once again admitted during questions and answers yesterday that “small providers such as community banks and credit unions did not create the problems that led to the financial crisis.” CUNA will continue to urge the Bureau and its officials that credit unions must see more action with respect to the agency’s exemption authority. For a copy of Director Cordray’s written testimony, click here.
FHFA, Fannie Mae & Freddie Mac Announce New Representation & Warranty Framework
On Tuesday, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac are starting a new representation and warranty framework for conventional loans sold or delivered on or after January 1, 2013. The new initiative, according to the FHFA, is aimed to clarify lenders’ repurchase exposure and liability on future loan deliveries. Under the framework:
- Lenders will be relieved of certain repurchase obligations for loans that meet specific payment requirements, for example, rep and warranty relief will be provided for loans with 36-months of consecutive, on-time payments;
- HARP loans will be eligible for rep and warranty relief after an acceptable payment history of 12 months after the date of acquisition;
- Information about exclusions for rep and warranty relief, such as violations of state, federal and local laws and regulations will be detailed; and
- Fannie Mae and Freddie Mac will continue to make available to lender a range of tools to help improve loan quality.
The framework also directs Fannie Mae and Freddie Mac to:
- Conduct quality control reviews earlier in the loan process, generally between 30-120 days after the loan purchase;
- Establish consistent timelines for lenders to submit requested loan files for review;
- Evaluate loan files on a more comprehensive basis to ensure a focus on identifying significant deficiencies;
- Leverage data from the tools currently used by Fannie Mae and Freddie Mac to enable earlier identification of potentially defective loans; and
- Make available more transparent appeals processes for lenders to appeal repurchase requests.
For more information on the new framework, click here for FHFA’s news release, which contains links to Fannie Mae Selling Guide Announcement and Lender Letter, as well as to Freddie Mac’s Bulletin and Industry Letter.
GAO Says Too Early to Tell on the Impact of Dodd-Frank; NCUA Defends Safety and Soundness of MBLs to GAO
The Government Accountability Office issued a report yesterday on the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on Credit Unions and Community Banks. The report basically concludes that it is too early to tell what the total impact of the Act’s provisions on credit unions and community banks will be. CUNA certainly concurs.
Requested by Senators Olympia Snowe (R-ME) and Mark Kirk (R-IL), the report examines changes credit unions and banks have undergone in the past decade and Dodd-Frank Act provisions expected to impact credit unions and community banks.
“…[R]egulators and industry officials have noted that they expect that some of the Act’s regulations will increase regulatory requirements on community banks and credit unions and disproportionately affect them, relative to larger banks, because of their size,” the report states.
The CFPB’s final remittances regulation is one of the rules cited in the report. “Industry associations (including CUNA), (parenthesis added) have questioned the ability of institutions that use open network (third party providers) to make remittance transfers… to continue to provide such services because of their difficulty in complying with the rule’s disclosure requirements.” CUNA continues to urge the CFPB to provide more flexibility to credit unions under the remittances rule. We have concluded our remittances survey and will be following up with the CFPB on that next week.
The GAO report provides a chart that attempts to list provisions that will impact banks and credit unions, but notably, debit interchange is not on the list, even though it is mentioned din the report. The report states that “Unlike large banks, community banks and credit unions have generally not, on average, experienced a significant decline in their debit interchange fees as a result of the Federal Reserve’s implementation of section 1075 of the Dodd-Frank Act.” However, the report also states, that “concerns remain about the potential for …interchange fees or fee income to decline over the long term.”
Of interest, the report repeats previous analysis the GAO developed that indicated member business lending contributed to 13 of 85 credit union failures from January 2008 to June 2011 (GAO 12-247). NCUA’s Executive Director, David Marquis, in a letter to GAO included with the report took issue with the agency’s analysis. “NCUA closely monitors commercial lending in our insured institutions, and we do not believe there is sufficient evidence to suggest member business loans pose a higher risk to credit unions or that a key driver in credit union failures is commercial loans,” Marquis said.
FedGlobal ACH Update on the CFPB Remittance Transfers Final Rule
The Federal Reserve Banks have provided an update on how their FedGlobal ACH product would meet the CFPB’s remittance transfers final rule’s requirements, which are effective on February 7, 2013. According to the update, FedGlobal ACH would enable its customers to provide estimated disclosures, and would also provide access to a tool to facilitate relevant disclosures. CUNA continues our advocacy efforts to improve the CFPB remittance transfers final rule for credit unions, and we are also working with FedGlobal ACH and other remittance stakeholders on implementation efforts.
FinCEN Summary of Customer Due Diligence Proposal Hearing
The Financial Crimes Enforcement Network (FinCEN) has released its summary and prepared remarks from its July 2012 public hearing regarding the agency’s advance notice of proposed rulemaking (ANPR) on customer due diligence (CDD) requirements for financial institutions, including credit unions. CUNA staff attended the hearing and we continue to emphasize that credit unions would face significant compliance challenges and costs if FinCEN proceeds with its ANPR, especially with regard to the potential expansion of the “beneficial ownership” requirements, as outlined in our May 2012 comment letter. We continue to work to minimize BSA regulatory and compliance burdens on credit unions.
FTC Guide on Advertising and Privacy for Mobile Applications
The Federal Trade Commission (FTC) has recently published a guide entitled, “Marketing Your Mobile App: Get It Right from the Start,” to assist mobile application developers in complying with federal advertising and privacy requirements. The guidelines include recommendations on truthful advertising, clear and conspicuous disclosures, and privacy considerations. CUNA staff attended the FTC’s workshop on mobile and online media privacy in May 2012, and we continue to monitor developments in privacy and disclosures and the potential effects on credit unions, consumer protection, and mobile payments.
CUNA Chart of Current Rulemakings: Updated 9/14/12
As promised, here is our updated chart on rulemakings. We will update it every week.
I hope you find this information useful. In the meantime, if you have any questions or comments about this report, please feel free to contact Mary Dunn, Bill Hampel, or me. I hope you all have a great weekend!