CUNA Regulatory Advocacy Report

CUNA Regulatory Advocacy Report: November 21, 2012

Good afternoon.  Here is an update on the issues that CUNA’s Regulatory Advocacy group has been pursuing in recent days. 

  • Upcoming Comment Letters to NCUA on November 26
  • CFPB Annual Financial Report
  • CFPB & FTC Target Deceptive Mortgage Advertising
  • CUNA Chart of Current Rulemakings: Updated 11/21/12

Upcoming Comment Letters to NCUA on November 26

We continue to press NCUA to provide additional regulatory relief for credit unions, so that credit unions can devote more resources to serving their members.  In that connection, in last week’s report I included a summary of our comment letter to NCUA on its definition of “small entity,” which we think should be substantially higher than the current $10 million level.

We have already shared with Leagues the drafts of the four other comment letters that are due Monday, November 26, to NCUA but wanted to include a brief summary of those letters here as well.

In general, these four proposals are positive because they potentially offer additional regulatory flexibility under NCUA’s current regulations. However, our letters, particularly on NCUA’s payday-alternative loan (PAL) program and the definition of rural district for purposes of federal credit union field of membership, urge improvements and additional enhancements to provide credit unions meaningful relief.  A summary of those letters is below and we will provide the links and further details when these comment letters are posted shortly.

  • Payday-Alternative Loans (PALs) – Under this Advance Notice of Proposed Rulemaking, the agency seeks input as to whether credit unions should be able to charge more than the current $20 application fee for loans under PALs.  NCUA also raised questions regarding other features of the PALs program. While NCUA does authorize a 28% annual percentage rate for PALs, the program is very restrictive and CUNA urges the agency to allow credit unions more latitude to determine the features and limits for these loans, within reason, and consistent with legal requirements. Our recommendations are based on CUNA’s policy statement on payday loan alternatives.
  • Rural District Definition – This proposal would amend NCUA’s definition of a “rural district” by broadening the population criteria of the “rural district” designation from its current limit of 200,000 persons, to a limit of 200,000 persons or 3 percent of the population of the state in which the majority of the district’s persons are located, whichever is greater.  All other criteria not related to the total population would remain intact.  While we appreciate that NCUA is seeking comments on the definition of “rural district,” the current limit must be raised beyond the proposed level in order to be useful to credit unions that are operating in sparsely populated states.Low Income
  • Credit Union Designation – We strongly support NCUA’s proposal to extend the time period credit unions have to accept a low-income (LICU) designation from 30 days to 90 days.  As the agency has noted, some credit unions are currently finding that it takes longer than 30 days to fully consider the ramifications of the designation and to obtain any necessary approval from its board of directors.  CUNA also urges NCUA to work with state regulators to ensure the LICU-designation process is positive for state chartered credit unions.
  • Treasury Inflation Protected Securities – This proposal would allow federal credit unions to purchase Treasury Inflation Protected Securities (TIPS) as a permissible investment.  We strongly support this proposal, and also urge NCUA to work with state regulators to facilitate the ability of well-managed state credit unions to invest in these securities where permissible under state law.  In our view, credit unions should be able to use TIPS to manage their portfolios and balance sheets to mitigate inflationary risks consistent with appropriate risk and asset-liability management. 

CFPB Annual Financial Report

Late last week, the Consumer Financial Protection Bureau (CFPB) issued its Financial Report for Fiscal Year 2012 which is required by the Dodd-Frank Act.  The report contains some interesting information about the activity of the CFPB over the past year, as well as remarks within the Management Discussion and Analysis section of the report, aside from the financial aspects.  Additionally within the report, the CFPB touts the fact that it received an “unqualified” or “clean” audit opinion from the Government Accountability Office (GAO) for Fiscal Year 2012, and that “Maintaining an unqualified audit opinion on the CFPB’s comparative financial statements for fiscal years 2012 and 2011 is a true testament to the efforts of the CFPB management and staff.”  However, upon closer examination, the GAO audit opinion contains the following:

During fiscal year 2012, CFPB made progress, but did not yet complete all actions necessary to fully resolve internal control deficiencies related to CFPB’s documented accounting policies, procedures and information security management that we identified during our prior year audit.  During our fiscal year 2012 audit, we identified additional deficiencies in CFPB’s implementation of its policies, procedures, and controls over CFPB’s information security.  We do not consider the remaining deficiencies from our fiscal year 2011 financial audit, and the deficiencies found during our fiscal year 2012 audit, individually or collectively to constitute material weaknesses or significant deficiencies.  Nonetheless, these deficiencies warrant CFPB management’s attention.  We have communicated these matters to CFPB management and, where appropriate, will report on them separately. 

Of note, it is interesting that the CFPB’s response to the GAO auditor’s report (Appendix II to the Financial Report linked above) contains no reference to any such internal control deficiencies, nor the CFPB’s efforts in addressing these same items.  In light of this comment, and especially in times when information security data breaches such as the recently announced South Carolina State government data breach are so prevalent, CUNA will be following up in coming weeks and months with the CFPB to learn how and to what extent these internal control deficiencies are being addressed and hopefully remedied within the agency.

CFPB & FTC Target Deceptive Mortgage Advertising

Earlier this week, the CFPB, along with the Federal Trade Commission (FTC), sent Letters to numerous lenders concerning potential violations of the Mortgage Acts and Practices rule, which became effective in August, 2011.  The rule addresses claims and statements in mortgage advertising that may be misleading to consumers, and the CFPB and FTC share supervisory authority for enforcement of the rule.  The impetus behind the letters was alleged abuse of veterans and older Americans.

The letters were sent based on a random sample of about 800 mortgage ads reviewed by the agencies and included ads for mortgage loans, refinancings and reverse mortgages from ads placed in newspapers, on the Internet, mail solicitations and from consumer complaints submitted to the agencies.

Specifically, the rule prohibits misleading claims concerning government affiliation, interest rates, fees, costs, payments associated with the loan, and the amount of cash or credit available to the consumer.  CUNA’s Final Rule Analysis on the Rule is located here. The CFPB advised that they will investigate all instances of potential violations of the Rule, and execute enforcement actions, where appropriate and applicable.  For more information on the Rule and the agencies’ joint efforts, click here

CUNA Chart of Current Rulemakings: Updated 11/21/12

Here is our updated chart on rulemakings.

Conclusion

As always, we appreciate the positive comments we continue to receive about this report and suggestions for items you would like us to cover are always welcome.  For any questions about this week’s report please feel free to contact Mary Dunn, Bill Hampel, or me.

Best regards,
Bill Cheney

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