CUNA Regulatory Advocacy Report

CUNA Regulatory Advocacy Report: December 21, 2012

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

  • Consumer Financial Protection Bureau Issues New Proposal on International Remittances
  • NCUA Plans to Improve Examination Notices and Provide More Information about the Appeals Process
  • CFPB Begins Review of the Impact of the CARD Act
  • CFPB Plans to Share Information with State Banking Regulators
  • FTC Finalizes Amendments to Children’s Online Privacy Protection Rule
  • FASB Proposes Changes to the Calculation of Credit Losses for Financial Instruments
  • CUNA Participates in CFPB Roundtable on the Agency’s Project Catalyst
  • GAO Report on Federal Regulators’ Efforts to Analyze and Coordinate Dodd-Frank Act Rules
  • CUNA Chart of Current Rulemakings: Updated 12/21/12

Consumer Financial Protection Bureau Issues New Proposal on International Remittances

As the CFPB indicated to us last night and in response to months of advocacy by CUNA, including with our international remittances working group that met with CFPB Director Richard Cordray on October 18, 2012, and the leagues, the agency today proposed revisions to its final rule. The rule was set to take effect February 7 but with these new changes, the agency is proposing to extend the implementation until 90 days after the new final rule is issued.  Click here for the proposal.

As indicated earlier by the agency, the proposal focuses on:

  1. Disclosure of Foreign Taxes and Institution Fees: The proposal would provide increased flexibility and guidance with respect to the disclosure of taxes imposed by a foreign country’s central government as well as fees imposed by a recipient’s institution for receiving a remittance transfer in an account.
  2. Disclosure of Subnational Taxes in Foreign Country: The proposal would require disclosure of foreign taxes imposed by a country’s central government, but would eliminate the requirement to disclose taxes imposed by foreign regional, provincial, state, or other local governments.
  3. Errors from Incorrect Account Information: Under the proposal, when the provider can demonstrate that the consumer provided an incorrect account number and certain other conditions are satisfied, the provider would be required to attempt to recover the funds but would not bear the cost of funds that cannot be recovered.

The CFPB has said that it expects to confine changes to the areas above. However, our advocacy efforts with the CFPB to improve the entire international remittance rule, including the current 100 transfers per year exemption level, will continue throughout the new comment period, which will end around late January for most of the proposal; comments will be due near mid-January regarding the delayed effective date.  

CUNA will be providing a new Comment Call as well as a revised survey to credit unions in light of the proposal. Also, we are planning a call in early January to discuss the proposal with leagues, Council members and other affiliated credit unions who offer international remittance services and will let you know as soon as the plans for the call are set. 

NCUA Plans to Improve Examination Notices and Provide More Information about the Appeals Process

NCUA is “making some major changes in its examination-related documents.” That is what NCUA Deputy Director of Examination and Insurance Tim Segerson told CUNA’s Examination and Supervision Subcommittee on a conference call earlier this week.  These actions are designed to “help credit unions understand why examiners do what they do, set a baseline for everyone to follow, and to help credit unions get organized for examiners,” according to Segerson.

CUNA and the Subcommittee have been pressing the agency for improvements in this area. Segerson informed the subcommittee that the agency plans to implement a uniform pre-examination letter that examiners would be required to provide to credit unions regarding upcoming examinations. The letter would describe key areas for review and documents, etc. that the examiner would like to review during the examination. CUNA questioned how much in advance of the examination the letter would be provided to credit unions, and Tim invited us to follow up with suggestions on the time frame. The agency is also going to include a cover document with the examination report that addresses what a credit union should do if it doesn’t agree with its examiner, the agency’s appeals process, and six levels of appeal at NCUA. A letter to credit unions will be sent from the agency in the coming weeks about the examination documents, which are designed to “help credit unions understand why examiners do what they do, set a baseline for everyone to follow, and to help credit unions get organized for” their examination. These are positive developments and CUNA will be working with the Subcommittee, credit unions, CUNA Council members and the leagues to ensure the changes have a positive impact on the examination process. 

Segerson also reinforced that financial trends at credit unions continue in positive directions, even though some pockets of the country are still struggling.  The “industry itself has adjusted to the financial crisis, and adjusted well for recovery,” he said.  Issues he said NCUA is following from a safety and soundness standpoint are that no one is sure how the problems in the European economy might impact the U.S. economy.  He added that the student loan market is a small portion of the balance sheet of credit unions, but is growing and NCUA is trying to make sure it understands this market.  He also said the agency is conducting extensive research on credit union self-funded benefit plans, which are essentially off-balance sheet.  He said some include “exotic” funding methods, and NCUA needs to evaluate what the risks are with these plans.

CFPB Begins Review of the Impact of the CARD Act

This week, as part of its mandate under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) to review the consumer credit card market, the CFPB issued a request for information regarding a number of aspects of the credit card market.  The Bureau is seeking information about how the credit card market is functioning following implementation of the CARD Act.  Specifically, the Bureau seeks comments pertaining to the following:

  • The terms of credit card agreements and the practices of credit card issuers;
  • The effectiveness of disclosure of terms, fees, and other expenses of credit card plans;
  • The adequacy of protections against unfair or deceptive acts or practices relating to credit card plans;
  • Any effect implementation of the CARD Act has had on the cost and availability of credit, particularly with respect to non-prime borrowers;
  • Any impact the CARD Act has had on the safety and soundness of any credit card issuers;
  • Any effect the CARD Act has had on the use of risk-based pricing; and
  • Any effect implementation of the CARD Act has had on credit card product innovation.

The CFPB is accepting public input for 60 days following publication of the request in the Federal Register.  A CUNA survey and Regulatory Comment Call on the proposal will be available shortly on our Comment Call page.

CFPB Plans to Share Information with State Banking Regulators

Recently, the CFPB issued a Statement of Intent for sharing information with state banking regulators.  While the statement relates primarily to nonbank entities under the CFPB’s direct jurisdiction, it is important to remember that the CFPB has entered into multiple memoranda of understandings with most every state.  According to the Conference of State Bank Supervisor’s Web site, as of April, 2012, all states except New Mexico have adopted the Memorandum of Understanding (MOU) executed in 2011 which allows for the sharing of information between the CFPB and various state banking regulators.  This most recent Statement of Intent is designed to supplement the MOUs and details the types of information the CFPB may share as well as the cooperative actions it intends to take.  The Statement also provides details on how consumer complaint information will be shared and disposed of between the CFPB and state banking regulators.  CUNA will continue to monitor the CFPB’s activity in the area of information sharing between various financial regulators and the potential impact on credit unions.

FTC Finalizes Amendments to Children’s Online Privacy Protection Rule

Earlier this week, the Federal Trade Commission (FTC) finalized amendments to the Children’s Online Privacy Protection rule, which implements the Children’s Online Privacy Protection Act of 1998 (COPPA).  The COPPA rule provides for privacy protections and gives parents greater control over the personal information that websites and online services may collect from children under the age of 13. 

Specifically, the COPPA rule requires that operators of websites or online services that are either directed to children under age 13 or have actual knowledge that they are collecting personal information from children under age 13 give notice to parents and get their verifiable consent before collecting, using, or disclosing such personal information, and keep secure the information they collect from children.  It also prohibits them from conditioning children’s participation in activities on the collection of more personal information than is reasonably necessary for them to participate.   

The FTC initiated a review in 2010 to ensure that the COPPA rule keeps up with evolving technology and changes in the way children use and access the internet, including through mobile devices and social networking.  The final rule includes modifications to the following definitions:  “operator,” “website or online service directed to children,” “personal information,” and others that credit unions will want to review against their operating policies and procedures with respect to youth programs, websites and perhaps other activities which may be subject to the COPPA rule’s requirements.

For more information, click here for a list of things the FTC wants businesses to know about, here for the agency’s press release, and here for the final rule.

FASB Proposes Changes to the Calculation of Credit Losses for Financial Instruments

Yesterday, the Financial Accounting Standards Board (FASB) issued a proposed accounting standards update regarding financial reporting of expected credit losses on loans and other financial assets held by financial institutions, including credit unions.

The proposed model would utilize a single “expected loss” measurement for the recognition of credit losses, which would replace the multiple existing impairment models in U.S. generally accepted accounting principles (GAAP) that generally use an “incurred loss” approach.  Under the proposal, the reporting entity would be required to estimate the cash flows that it does not expect to collect, using all available information, including historical experience and forecasts about the future.

We have some initial concerns with the proposed “expected loss” approach and will be analyzing the proposal with our Accounting Subcommittee and CFO Council.  FASB is accepting public comments on the proposal until April 30, 2013; CUNA’s Regulatory Comment Call on the proposed accounting standards update will be available shortly on our Comment Call page.

CUNA Participates in CFPB Roundtable on the Agency’s Project Catalyst

Earlier this week, Regulatory Advocacy staff participated in a roundtable hosted by the CFPB to discuss the agency’s Project Catalyst.  As reported in a previous Regulatory Advocacy Report, Project Catalyst is a Bureau initiative designed to encourage consumer-friendly innovation and entrepreneurship in markets for consumer financial products and services.  Further, through Project Catalyst, the CFPB intends to: (1) establish firm lines of communication with innovators; (2) understand new and emerging products in the market; and (3) engage with innovators.

This week’s roundtable focused on the Bureau’s recently proposed policy to encourage trial disclosure programs, which was noted in last week’s Regulatory Advocacy Report.  The proposed policy is the Bureau’s first effort pertaining to Project Catalyst.  The roundtable provided CUNA and others an opportunity to discuss with the CFPB specific issues of concern regarding the proposed policy on trial disclosure programs, as well as general issues regarding the process by which the Bureau initiates action items within Project Catalyst.  During the roundtable, CFPB staff clarified that a financial institution, including credit unions, would be permitted to float a trial disclosure program in collaboration with one or more financial institutions or other entities under the proposed policy, which is open for comment until February 15, 2013.  CUNA’s Regulatory Comment Call on the proposal will be available shortly on our Comment Call page.

GAO Report on Federal Regulators’ Efforts to Analyze and Coordinate Dodd-Frank Act Rules

The Government Accountability Office (GAO) has released a report, entitled “Agencies’ Efforts to Analyze and Coordinate Their Rules.”  The report covers the regulatory analyses federal financial regulators, such as the CFPB and NCUA, performed for rules issued pursuant to the Dodd-Frank Act; how the agencies coordinated with each other on rulemakings; and what is currently known about the impact of these rules.  The GAO identified 66 Dodd-Frank final rules that were issued between July 2011 and July 2012, including rules on debit interchange fees, risk-based pricing, and systemically-important financial institutions.  The GAO continues to recommend that regulators more fully incorporate comprehensive cost-benefit analyses into the agencies’ rulemakings, and that the Financial Stability Oversight Council establish formal interagency coordination.  Also, the GAO report noted continued concerns from small issuers about the potential for their interchange fee income to decline over the long term.  In addition, the GAO found that while the federal agencies considered the benefits and costs in the majority of their rules, the agencies generally did not quantify the costs and impact for such rules.  As we carefully monitor the implementation of the Dodd-Frank Act, we continue to have concerns regarding the effects from the debit interchange and other Dodd-Frank rules on credit unions.  CUNA continues to urge regulators to reduce regulatory burdens on credit unions and to conduct more rigorous cost-benefit analyses during the rulemaking process.

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 Eric Richard, Mary Dunn, or me.

Best regards,
Bill Cheney

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