CUNA Advocacy Update October 11, 2016

**BREAKING TODAY** CFPB Rules Unconstitutional by Federal Court: In a 2-1 ruling issued this morning, the U.S. Court of Appeals for the D.C. Circuit said the CFPB’s structure is unconstitutional; but the court allowed the CFPB to continue to function by giving the president the power to remove and supervise the director.

Jim Nussle’s Statement

  • I applaud the ruling from the U.S. Court of Appeals for D.C. Circuit regarding the PHH case against the Consumer Financial Protection Bureau, in that it will establish a meaningful check and balance and bring needed accountability to the Director’s role. This ruling confirms CUNA’s concern that the structure of the CFPB is flawed and that an unchecked, independent director who answers to no one can’t lead to good public policy. CUNA continues to support a five-person commission for the CFPB instead of its current structure.

We will have more on this later today in the Removing Barriers Blog and News Now.

360 Degree Advocacy On Full Display: For the last two years or so, we in the CUNA/League system have been talking a lot about “360 Degree Advocacy,” this notion that if public policy issues facing credit unions are addressed from all angles, and resources are brought to bear strategically and deliberately, the likelihood of a successful outcome is increased significantly. Last week, we saw what 360 Degree Advocacy can do on two key issues – CFPB’s small dollar loan Proposal and NCUA’s supervisory improvement process. To be certain, this was not the first time this approach produced positive results, but the progress we’ve made on these issues would not have been achieved if we had approached them “the old way.” [Read more]

CUNA Urges CFPB to Withdraw Payday Proposal or Exempt Credit Unions: In response to the CFPB’s more than 1300 page rule released in June, which sweeps in consumer friendly credit union products and services, CUNA filed a comprehensive 61 page comment letter advocating for the protection of credit union members. Despite little or no research on credit union small dollar lending, and despite a total of only four of the 4,493 consumer complaints regarding payday loans involving credit unions, the CFPB proposed sweeping credit unions into the rule under its Unfair and Abusive sections of its UDAAP authority.

Our comment letter makes four key points:

  • Credit unions were established, in part, to provide access to small dollar credit.
  • CFPB should consider credit unions’ different organizational and regulatory structure.
  • Abuse in the small dollar lending market should be curbed and responsible lenders should be held to a standard separate from abusers of consumers.
  • The final rule should ensure credit unions are able to continue to serve their members in a safe and affordable manner.

There’s really not enough room in this report to completely cover the 61-page comment letter. So, please check out this blog post, our summary of the letter, or the letter itself.

Dentons US LLP Files Legal Comment Letter on Behalf of CUNA: In addition to filing our own comprehensive comment letter, CUNA retained the Dentons US LLP to file a comment letter focusing on the legal questions surrounding the CFPB’s payday lending proposal. The legal opinion letter focused on three key points:

  • Credit unions should be exempt from the proposed rule because they are highly regulated depository institutions and simply do not engage in the predatory and high-risk lending activity targeted by the proposed rule.
  • As currently drafted, the proposed rule is arbitrary and capricious under the Administrative Procedures Act as applied to credit unions because the CFPB entirely failed to consider how credit unions lend and how credit union members’ access to credit would be negatively impacted by the implementation of the proposed rule.
  • As currently drafted, the proposed rule exceeds the authority of the CFPB because it establishes a de facto usury cap; it should have been promulgated under Regulation Z instead of the Unfair, Deceptive, and Abusive Actions and Practices Act (UDAAP); and applying the ability to repay standard on small dollar loans represents an unauthorized departure from a well-established regulatory scheme, which without a direct mandate from Congress, represents an unreasonable interpretation of the CFPB’s statutory UDAAP authority.

The Dentons US LLP letter begins on page 62 of our letter.

NCUA Asks CFPB to Exempt PAL Loans: NCUA Chairman Rick Metsger sent a comment letter to the CFPB on its payday lending proposal as well. In his letter, Chairman Metsger told the Bureau that NCUA’s PAL program protects consumers and that the final CFPB rule should exempt loans made consistent with this program, and consider other changes to the proposal. [Read More]

Citing CUNA Information, SBA Office of Advocacy Urges Small Credit Union Exemption from CFPB Payday Rule: For several months, CUNA has been actively working with the U.S. Small Business Administration (SBA) Office of Advocacy to help them understand how the CFPB’s payday proposal will impact credit unions. In addition to holding a SBREFA panel on the proposal, the SBA conducted three roundtables in the month of September to determine the impact of the rule on small businesses. Credit unions, Leagues, CUNA Mutual and CUNA attended these roundtables. Attendees also included other trade association representatives, legal counsel, and business owners there representing payday lenders, online lenders, banks, and tribal lenders, as well as various government representatives including Hill staff from the Small Business Committee and CFPB staff. Last week, SBA filed its comment letter.

SBA Office of Advocacy specifically identified concern about the impact the rule will have on credit unions, noting that the CFPB needs to recognize the NCUA’s expertise in the area of credit unions and exempt small credit unions from the proposed rule. It further noted that the proposed rule adds unnecessary complexity and new compliance burdens to consumer friendly credit union small dollar loans and questioned whether the proposal could harm consumers and their access to credit. [Read More]

NCUA Working Group Reports CUNA/League-Recommended Extended Exam Cycle to Board: After coordinated and diligent advocacy by CUNA, the Leagues, and credit unions, the NCUA has made available their Exam Flexibility Initiative Report. The report makes several recommendations to NCUA’s Board with January 2017 implementation dates also recommended. Most notable, and a win for credit unions, is the CUNA-advocated recommendation of an extended exam cycle for credit unions with assets under $1 billion. Also for 2017, the report recommends:

  • Enhanced coordination of exams for federally insured, state-chartered credit unions; and
  • Establishment of an NCUA and state supervisory working group.

According to the report, NCUA’s Board will vote soon on whether to approve the recommendations for 2017. [Read More]

Pending Regulatory Comment Calls: CUNA intends to comment on the following pending regulatory proposals. For our comment letter to have the greatest impact, we need to hear from you. Please consider whether and how these proposals would affect your credit union, and contact the CUNA staff listed with each proposal with your feedback    We encourage Leagues and credit unions to use PowerComment to file comment letters with regulators. For more information regarding these proposals, please follow the links below:

Issue Comment Period Deadline Agency CUNA Staff Contact
Single-Family Credit Risk Transfer October 13, 2016 FHFA Andy Price
Amendments to TRID under Reg Z October 18, 2016 CFPB Andy Price
CIP/AML & Beneficial Ownership Requirements for Banks Lacking a Functional Federal Regulator October 24, 2016 FinCEN Luke Martone
Amendments Relating to Disclosure of Records and Information October 24, 2016 CFPB Luke Martone
Request for Information: Payday Loans November 7, 2016 CFPB Leah Dempsey

Arkansas Lawmakers Reject Interchange Bill: Lawmakers in Arkansas rejected a bill that would require a study of the revenue implications of prohibiting interchange fees on nonfederal taxes. [Read More]

Removing Barriers Redux: Last week, we dedicated the entire update to the payday lending proposal. Be sure to check out some of the Removing Barriers Blog updates that you might have missed:

Posted in Advocacy News, CUNA.