NAFCU Compliance Blog

To Innovate or Not to Innovate… Ask the CFPB!

Written by Shereefat Balogun, Regulatory Compliance Counsel

Yesterday, the CFPB finalized a policy that aims to promote innovation in the financial services marketplace. Generally, the policy establishes a process for companies to apply for a “no-action letter” from the Bureau. The no-action letter essentially indicates that the Bureau has no present intention to recommend or initiate any enforcement or supervisory action with respect to the company’s product or service under consideration.

The new policy is designed to enhance regulatory compliance in instances where innovative financial products or services may be beneficial to consumers, but there is uncertainty as to whether or how the product fits in the current regulatory landscape. The CFPB acknowledges that companies may be discouraged from developing new innovations where the product or service is not explicitly addressed or even contemplated under existing law. Accordingly, the Bureau has developed this policy as a means to reduce such regulatory uncertainty.

The policy has five sections:

• Section A describes information that should be included in requests for a No-Action Letter

• Section B describes types of responses the staff may provide to requests for a No-Action Letter

• Section C lists factors the staff may consider in deciding whether to provide a No-Action Letter

• Section D describes the general content and limitations of No-Action Letters

• Section E describes disclosure of data received from entities who have requested No Action Letters

Any company considering applying for a “no-action letter” should note the following:

• No-action letters will not be widely available; rather, they will be provided only in exceptional circumstances and upon a “thorough and persuasive demonstration of the appropriateness of such treatment”;
• No-Action Letters are generally limited to emerging products involving substantial regulatory uncertainty. They are not intended for either well-established products or purely hypothetical products that may be offered in the future;
• The policy requires a substantial amount of information to be included in the application. It also makes clear that the Bureau may require additional information if necessary;
• The policy is not a waiver of any law or regulation, and will not give a requesting entity an exemption from complying with any statutory or regulatory rules;
• The no-action letters are not binding. In other words, the letters will not bind courts or other third parties, including consumers or other regulators, who may challenge the product or service;
• No-action letters will be subject to modification or revocation at any time at the discretion of the Bureau, and may be conditioned on specific undertakings by the company;
• When the Bureau issues a no-action letter, it generally will publish the letter, along with a version or summary of the company’s request, on the Bureau’s website.

As a reminder, this policy will only be applicable to credit unions directly supervised by the CFPB- those with over $10 billion in assets. The policy has been submitted to the Federal Register and is available at: http://files.consumerfinance.gov/f/201602_cfpb_no-action-letter-policy.pdf

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Regulatory Relief: Your chance to weigh in

Written by Brad Thaler, Vice President of Legislative Affairs

I know that the compliance community is well aware of the ever-increasing regulatory burden credit unions face in a post Dodd-Frank world.  Last week, NAFCU told the Senate Banking Committee about this burden and our ideas for regulatory relief when NAFCU’s Board Chairman and SRP FCU President/CEO Ed Templeton testified Thursday before the committee at one of two hearings examining “Regulatory Relief for Community Banks and Credit Unions.”  Last Tuesday, the Committee also heard from financial regulators, including NCUA.

Now the Senate Banking Committee wants to hear from you.  They have asked NAFCU to gather stories and letters from individual credit unions about the regulatory burdens you face and ideas for where and how your credit union needs relief.  It is with this in mind that I am asking for your input.

Are there particular statutes or regulations that are especially burdensome on your institution and your ability to serve your members?  Are there some that just seem out of date? How should they be changed?  What has the impact been on your institution?  Are there examples of regulatory cost/time estimates that your institution finds are off-kilter?  (You can view NAFCU’s Top Ten Regulations to Eliminate or Amend and our new Five-Point Plan for Credit Union Regulatory Relief if you need some ideas.)

If your credit union is interested in sharing your regulatory burden stories or regulatory relief ideas with Senate Banking Committee Chairman Richard Shelby, please reach out to me at [email protected], and I will walk you through the submission steps.

The Committee’s ultimate goal is to take your suggestions and craft a common-sense regulatory relief package, which they hope to bring to the Senate floor this spring.  The Committee hopes to get comments as soon as possible, so I ask that you try to get us any letters by Thursday, February 26^th.  Please reach out to me, directly with any questions ([email protected] or 703-842-2204).   

Staying on the topic of providing feedback on regulatory review, the hearings last week also had a lot of discussion about the EGRPRA process.  The Committee noted that EGRPRA provides a lot of important insight on areas that regulators need to act and can also give Congress reform ideas.  It is with this in mind that I also want to encourage everyone to submit your comments on NAFCU’s Regulatory Alert 15-EA-03 on NCUA’s second EGRPRA review. Comments are also due to NAFCU on February 26^th.  You can complete our Regulatory Survey, or reach out to Alicia Nealon, NAFCU’s Director of Regulatory Affairs, directly ([email protected], 703-842-2266) with your thoughts. 

Thanks in advance for your participation in this process.

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NAFCU Webcast. Regulation Z: Five Challenges and Their Solutions - Regulation Z of the Truth in Lending Act (TILA) may be the oldest federal consumer credit law, but it can still be challenging to heed. Make sure you’re not overlooking its fundamental principles with a NAFCU webcast that dives into TILA’s five core issues, and examines how best to address them.  This important knowledge is just as important as staying up-to-date on the Act’s latest changes.

 

FHFA Proposes Changes to Federal Home Loan Bank Membership Eligibility

Written by Angela Meyster, Senior Regulatory Affairs Counsel

Last month, the Federal Housing Finance Agency released a proposal that would change the eligibility requirements for institutions, including credit unions, to join and maintain membership in Federal Home Loan Bank (FHLBs).  While NAFCU estimates that the current level of credit union involvement with FHLBs is relatively low (around 19% of all federally insured credit unions), the Federal Home Loan Banks do provide an important avenue for liquidity to which an increasing number of credit unions may look to as lending becomes tighter in the future and interest rates rise. The impact of this proposal on your credit union today may be minimal, but as your credit union plans for the future you may want to familiarize yourself with how the FHLB system works now and would work under the proposal.

So how does it work? Federal Home Loan Banks operate a bit like credit unions in that they are cooperative, member-owned institutions. There are twelve of them, organized by region, and they offer low-cost secured borrowing to their members in order to assist with liquidity, housing mortgage markets, and community development. Federal Home Loan Banks represent the largest collective source of home mortgage credit in the U.S. and they have been a source of significant assistance to participating credit unions.

The proposal would change a number of things about FHLB membership.  The three most important for credit union purposes are that it would:

• Require FHLB members and applicants to keep 1% of assets in “home mortgage loans;”
• Require FHLB members to have at least 10% of assets in “residential mortgage loans” on an ongoing basis; and
• Require FHLBs to determine member compliance on an annual basis, and terminate the membership of any credit union that has been noncompliant for two consecutive years.

Currently, there is no 1% requirement to keep assets in “home mortgage loans.”  Under the existing regime, a credit union, upon becoming a member, must be in the business of making “long term home mortgage loans,” but there is no quantitative component of making this determination.  Additionally, the 10% requirement to hold assets in “residential mortgage loans” currently only applies upon application for FHLB membership.  The proposal’s requirement to maintain this threshold asset allocation on an ongoing basis may pose issues for some credit unions that do not concentrate on mortgage lending.

In order to make compliance with the 1% requirement somewhat easier, however, the proposal would expand the definition of

“home mortgage loans” to include “any loan or interest in a loan that is secured by a first lien mortgage or any  mortgage pass-through security that represents an undivided ownership  interest in such loans or in another security that represents an undivided ownership interest in such loans.”

NAFCU has met with the FHFA to discuss aspects of the proposal and requested an extension of the comment deadline. NAFCU requested the extension because of the complexity of the rule, and the significant impact the rule could have on the industry and credit unions ability to establish and maintain membership in FHLBs. The comment period closure, originally slated for November 12, 2014, has been extended until January 12, 2015.  We continue to emphasize that the requirements set out in the proposal are unnecessary and prohibitive, especially for credit unions, which have not participated in the type of activities the proposal targets.  NAFCU has noted that the proposal would make it more difficult for credit unions to provide credit to their members and could prevent many credit unions who have  been long-time FHLB members from being able to continue their membership.

FFIEC “Shellshock” Vulnerability Alert; Cyber Security Awareness; Consumer Compliance Outlook; Outlook Live Webinar on Fair Lending

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

Federal Financial Institutions Examination Council (FFIEC) members recently issued a statement advising financial institutions of a material security vulnerability in the Bourne-again shell (Bash) system software, referred to as “Shellshock.” The statement outlines the agencies’ risk management expectations. From the statement:

“While vendors are working to patch and update their systems, the FFIEC member agencies expect financial institutions to conduct a risk assessment and address the Shellshock vulnerability as part of ongoing information security and incident response plans. Financial institutions should take the following steps, as appropriate:

• Identify all servers, systems, and appliances that use vulnerable versions of Bash and follow appropriate patch management practices, including conducting a vulnerability scan to detect if the patch is installed and testing to ensure a secure and compatable configuration.³
• Apply mechanisms to filter malicious traffic to vulnerable services such as appropriate Web application firewall signatures.
• Monitor systems for malicious or anomalous activity and update signatures for intrusion detection and prevention systems.
• Ensure that all third-party service providers are taking appropriate action to identify and mitigate risk and monitor the status of vendors’ efforts to address the vulnerability.
• Review systems to determine if this vulnerability has been exploited and, if necessary, conduct a forensic examination to determine the potential effects of any breach.” (Footnote omitted)

The statement also includes references for monitoring threats and vulnerabilities and is available in its entirety here.

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Cyber Security Awareness. October is also cyber security awareness month.  NCUA recently took this opportunity to remind credit unions about its Cyber Security Resources page  and that cyber security remains a priority.

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Consumer Compliance Outlook. The Third Quarter 2014 issue of the Federal Reserve’s Consumer Compliance Outlook is now available. One of the articles features responses to questions received during an April 10, 2014, webinar held by the Federal Reserve System. Although the article, Consumer Compliance Management Program – Common Concerns and Best Practices Webinar Questions and Answers, is directed at Board supervised institutions, it is a useful read and touches on several topics of interest – the development of compliance management programs, compliance risk assessments, vendor management and regulatory change management. Here’s an excerpt from just one of the Q&A’s:

“Are there examples of a change management process that you can share with us?

Given the changing regulatory landscape with additional responsibilities of banks under new or revised regulations and pressures to follow competitors as new products are introduced in the marketplace, establishing a change management process can be an effective tool not only to manage changes but also to track any steps the institution has taken to mitigate potential harm and risks to consumers and the institution. The methods of developing and implementing a change management process may vary based on the institution’s size, complexity, and resources available.

Change management should be a structured and disciplined process that can be repeated since change can always be expected. The RFS Program describes that an effective change management process:

• requires management and staff from all affected functions — potentially including compliance, accounting, risk, internal audit, and line management — to review and recommend a response or change proposal for senior management or board approval that clearly articulates expected results. The entire life cycle of a product or service affected by the change must be considered, whether it involves the introduction of a new product or service or a change affecting existing bank operations.
• incorporates appropriate approval processes associated with implementation.
• requires that operating policies and procedures are updated to provide clear guidance to staff on how to comply with all legal or regulatory requirements.
• requires that staff be properly trained regarding the change.
• incorporates monitoring of the deployment of the new or revised process, product, or service.
• requires a review after implementing a change to determine whether the actions taken achieved the expected results.^14”  (Footnote omitted)

This Q&A, and the remainder of the article, may be found in its entirety here.

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Outlook Live Webinar on Fair Lending.  The Federal Reserve System is also hosting a free webinar entitled “2014 Federal Interagency Fair Lending Hot Topics” on Wednesday, October 22, 2014, from 2:00 p.m.–3:30 p.m. Eastern. The webinar will feature representatives from various federal agencies, including NCUA, and will discuss emerging fair lending issues and hot topics. Additional details and registration is available here.

 

NAFCU Tells Senate Banking Committee “Enough is Enough;” NCUA Announces Agenda for September Meeting; NCUA Videos on Financial Abuse of Seniors

Written by Brandy Bruyere, Regulatory Compliance Counsel

NAFCU Testifies Before Senate Banking Committee.

Yesterday, XCEL Federal Credit Union President and CEO Linda McFadden testified on behalf of NAFCU before a Senate Banking Hearing regarding regulatory relief. McFadden told the Committee that “enough is enough” with regard to overregulating credit unions. In addition to addressing problems with NCUA’s “one size fits all” risk-based capital proposal, McFadden also urged support for multiple regulatory relief bills addressing issues such as annual privacy notices, points and fees requirements for qualified mortgages, and the member business lending cap. McFadden’s prepared testimony also covered additional regulatory burdens outlined in NAFCU’s Dirty Dozen in greater detail such as Regulation D’s current six-transaction limit for savings deposits.

Agenda for Tomorrow’s NCUA Board Meeting. NCUA seems to have a light agenda for this month’s Board meeting. The following matters will be considered:

• Final Rule, Parts 701, 706 and 790 of NCUA’s Rules and Regulations, Technical Amendments;
• First Service Federal Credit Union (Groveport, Ohio), Request to Expand Community Charter;
• Corporate Stabilization Fund Quarterly Report.

NAFCU will keep members posted on Thursday regarding the outcome of this meeting.

NCUA Videos on Protecting Seniors from Financial Abuse. On Monday, NCUA announced the release of two videos designed to help credit unions recognize and prevent exploitation of and fraud against senior citizens. The first video aims to show how a consumer could be victimized by a typical “lottery” scam where a member receives a check for their “winnings,” with a request to pay taxes and fees by wire transfer. The second video is a Consumer Protection Update that reviews how to report elder financial abuse and exploitation, as discussed in further detail in this 2013 Letter to Credit Unions.

NAFCU's New Website Improves Search Functions. NAFCU members can check out the new Compliance Resources Search on our completely revamped website. It’s an easy way to find helpful information in a variety of formats. Search and filter by resource type to find articles, charts, common questions and answers, final regulation summaries, regulatory alerts and more. 

Getting Ready for Baby. The nursery, or as I’m calling it, the “Seuss-ery,” is coming together nicely. However, I hope Lemmy learns that the “baby brother” isn’t a pillow because it won’t be as cute when he’s crying in Lemmy’s face! But from the looks of it, both Lemmy and nursery are ready for baby.

NCUA 2013 Annual Report; NCUA Board Meetings—May Agenda & April Video Now Available; Webcast on Social Media Advertising; Nanny Dog

Written by Brandy Bruyere, Regulatory Compliance Counsel

NCUA’s 2013 Annual Report

On May 12, 2014, NCUA released its 2013 Annual Report which highlights last year’s NCUA initiatives and accomplishments and the agency’s perceptions of its work on “easing regulatory burdens.” NCUA grouped its report into six broad categories, quoted from the agency’s press release:

• Implement an effective supervision program to ensure the continued safety and soundness of federally insured credit unions.
• Adopt safe, targeted and flexible regulations to protect the credit union system and maintain a strong and independent National Credit Union Share Insurance Fund.
• Modernize the agency’s operations.
• Minimize assessments for the Temporary Corporate Credit Union Stabilization Fund.
• Engage and provide assistance to key stakeholders.
• Serve as a responsible steward of the public’s trust.

The report also highlights an area of particular interest for those who work in compliance—fair lending exams. In 2013, NCUA’s Division of Consumer Compliance Policy and Outreach examined 26 credit unions for compliance with fair lending laws. This exceeded NCUA’s annual goal to conduct 18 on-site fair lending examinations by 44% and the exams took NCUA 5,334 hours to complete. For those keeping score at home, that’s over 205 hours per examined credit union. NCUA more than doubled the number of such exams compared to 2012, when the agency conducted only 10 fair lending exams. Additionally, NCUA reported 41 off-site supervisory contacts with credit unions relating to fair lending compliance. The increased focus on fair lending supervision serves as a reminder that while following new regulations is important, so are long standing provisions under rules like Regulation B (ECOA) and Regulation C (HMDA). For those who are interested, NCUA has a collection of fair lending compliance resources including its Fair Lending Guide.

NCUA Board Meetings—Agenda for May and Video Available for April

On May 15^th, NCUA released its agenda for this month’s Board meeting. May’s agenda is not particularly exciting, which is probably a good thing since “exciting” when used to describe a Board meeting is too often a euphemism for “more regulations.” Here are the three items on the agenda:

• Notice and Request for Comment, Economic Growth and Regulatory Paperwork Reduction Act Review (EGRPRA);
• AERO Federal Credit Union (Glendale, AZ) Request to Ad Two Underserved Areas;
• Corporate Stabilization Fund Quarterly Overview.

The first item is worth noting because under the EGRPRA, NCUA is required every ten years to invite comment on rules that are outdated, unnecessary, or unduly burdensome. This is a good opportunity to stress the need for regulatory relief in important areas so credit unions may want to consider participating in this public comment process.

Finally, for those who are interested, on May 15^th NCUA also uploaded the video for April’s Board meeting to its website. Just as a reminder, the April meeting included a proposed rule on associational common bond requirements and a final rule on capital planning and stress testing.

Webcast: Advertising Series--Truth in Savings and Its Impact on Social Media

Social media is a powerful advertising tool…and a dangerous one. Understand social media advertising risks regarding Truth in Savings with this helpful compliance webcast. You’ll examine advertising requirements such as trigger terms, APY disclosures and electronic promotions. Plus, you’ll dive FFIEC’s final guidance on social media, and get best practices for managing advertising and social media compliance at your credit union. Register by June 11 to save $100.

Nanny Dog

My husband and I recently babysat for some friends, and like many babies, our friends’ son was a little upset at bedtime. Lemmy just couldn’t stand to hear the baby cry, so he “helped” get the little guy to go to sleep.

FHA Makes Positive E-Signatures Change; Free Kick; ERM Webcast

Written by Ricardo Piñeres, Regulatory Compliance Counsel

With all of the new compliance requirements that have accompanied the start of 2014, it is easy to get trapped in a vortex of negativity.  Credit unions are struggling to keep up with the growing regulatory burdens, and many in our industry have suggested that instead of just adding new regulations, regulators should be looking to modernize some of their more outdated requirements.  Well, for those that have been clamoring for a step in the direction of modernity, I bring good news.  At the end of last month, the FHA announced that it would finally expand the list of documents for which it will accept electronic signatures!

Prior to this announcement, FHA only accepted e-signatures on third-party documents (i.e. sales contracts and other documents not under the lender’s control).  In addition to third-party documents, the new policy states that e-signatures are valid on the following documents:

• Origination;
• Servicing;
• Loss mitigation;
• FHA insurance claims;
• REO sales contracts; and
• Related addenda.

Lenders that choose to accept e-signatures may begin taking advantage of the FHA’s new policy immediately on both single family forward mortgages and reverse mortgages.  For the time being, the FHA will not be accepting e-signatures on the mortgage note, itself.  It is expected that they will begin accepting e-signatures on forward mortgage notes by the end of the year.

In order to take advantage of the FHA’s new policy, all lenders that submit electronically-signed documents must have specific technology and operational capabilities and controls, documented quality control processes, and the ability to adapt the electronic signature to FHA’s existing record retention processes.  Furthermore, any lender that chooses to take advantage of the FHA’s new policy must still comply with all of the requirements of the E-SIGN Act.  For more information on the requirements, credit unions should view FHA’s Mortgagee Letter 2014-03.

While this may not do much to ease the ever-growing regulatory burden on credit unions, it is heartening to see a government entity seeking to improve its processes.  I applaud the FHA for making it easier for lenders to work with them, and hope that they continue to streamline their processes.  Not only will this help lenders, but ultimately, it will help consumers seeking to take advantage of the FHA’s products.

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Free Kick. I am in the middle of a tense two weeks.  As a die-hard supporter of Arsenal, the schedule has put together a string of fixtures that will either make or break the Gunners’ season.  If Arsene Wegner and Company can survive these two weeks, then maybe I can dream of an end to the trophy drought.

Sadly, things did not get off to a good start over the weekend.  The drubbing at Anfield saw Arsenal play its worst game of the season (excluding the league opener to West Ham).  While Liverpool has been firing on all cylinders, I’m hoping that the embarrassment of this past weekend will fuel Arsenal to seek some revenge and move into the FA Cup Quarterfinals when they host Liverpool on Sunday.

Turning to the Premier League, thankfully, Chelsea dropped two points to West Bromwich in the waning minutes of yesterday’s match.  Therefore, Arsenal can go back to the top of the Premier League with a win later today against Manchester United.  ManU, frankly, has been mediocre to start 2014, so Arsenal need all three points if they are to truly contend down the stretch.

Lastly, the knockout stages of the UEFA Champions League get underway next week.  Arsenal was unable to win their group in the fall, so they have drawn Bayern Munich.  This is a repeat of last year’s Round of 16 matchup.  While Arsenal is a much improved squad this season, I see a similar result in our future with Bayern Munich coming away with a close win over the two-legged contest.

Hopefully, the loss to Liverpool at Anfield was just an aberration, and I can continue to dream of a trophy or two!  Go Gunners!

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Webcast. Enterprise Risk Management (ERM) – Practical Ways to Implement at Your Credit Union.

Does ERM really differ from normal risk management? Yes! ERM allows you to leverage the risk-return relationship in everything from project management to strategic planning. Register by Feb. 27 to save $100 and learn how to make your credit union more effective.

FFIEC Issues Final Social Media Guidance; Berger at MACUMA: Enough is enough

Written by Alicia Nealon, Regulatory Compliance Counsel

Happy Friday compliance community! My name is Alicia Nealon and I am one of two new Regulatory Compliance Counsels here at NAFCU. As this is my inaugural blog post, and they always say you only get one chance to make a first impression, I figured I would start with something that we can all relate to- social media.

Social Media has all but exploded in the past five years.  Today, three out of every four Americans belong to social media sites.  Visiting these social media sites has become the fourth most popular online activity-ahead of even personal email. In fact, in August 2011, Facebook surpassed Google as the site where internet users spend the majority of their time.  Today, 41.1 million hours are spent on Facebook every single week.

Regulators, and the compliance community, have struggled to adapt to how the explosion of social media has consumed current culture and business practice.  But on Wednesday, the Federal Financial Institutions Examination Council (FFIEC) issued a final guidance aimed at helping, banks, credit unions and other financial institutions manage risks related to social media. 

The FFIEC published the guidance in proposed form in January 2013 and invited public comments through March 25, 2013.  Taking into account the 81 official comments on the proposal, this final guidance differs from the proposal released in January in several respects, most notably the expectations for risk management practices and the definition of social media. 

Addressing the concerns raised by NAFCU Regulatory staff and other commenters that that the proposal appeared to recommend a "one-size-fits-all" approach for all lenders, the FFIEC acknowledged that a financial institution’s approaches to managing social media risk will vary according to its size, complexity, activities and relationships with third parties.  For example, commenters worried that the proposed guidance would require banks and credit unions to monitor all online communications that mention their institutions.  The final guidance clarifies this is not the case, but rather each financial institution should conduct its own risk assessment to determine the appropriate approach to take regarding monitoring of, and any response to, online complaints and inquiries about the institution.

The revised guidance also incorporates the requests from NAFCU Regulatory staff and other commenters to recognize that social media differ from other modes of communication.  Under the final guidance, traditional emails and text messages, standing alone, are not social media. However, messages sent through social media channels are social media.  The guidance cautions financial institutions to stay abreast of existing laws for emails and text messages, as they may overlap with social media regulations.

The guidance covers several other areas specific to the credit union industry, including clarification that the existing requirements regarding NCUA membership and share insurance apply equally to advertising and other activities conducted via social media as they do in other contexts. For more information, take a look at the guidance here. 

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While the FFIEC guidance does not impose any new regulatory requirements on financial institutions, NAFCU is committed to combat those existing and pending regulations that have begun to wreak havoc on the credit union industry.  Earlier in the week, NAFCU President and CEO Dan Berger spoke about the overregulation of credit unions as well as NAFCU’s plan to target “the dirty dozen” top regulations that must be eliminated or changed during his address Tuesday night before the Metropolitan Area Credit Union Management Association in Arlington, Va.

"Credit unions cannot serve Main Street if they remain locked in an uphill battle with Wall Street,” Berger said. “In its very essence, overregulation is nothing more than a regressive tax – one that hamstrings our fundamental ability to compete. Most important, every dollar credit unions spend on regulatory compliance is a dollar they cannot invest in a family's dream of homeownership or a budding entrepreneur's vision for a small business. It's far past time for a common-sense approach to regulation based on government's power to help rather than its ability to hinder.”

Berger cited several legislative efforts to curb the overregulation of the industry, including the “Regulatory Relief for Credit Unions Act,” introduced by Rep. Gary Miller, R-Calif. He also highlighted NAFCU’s decision to go after the top 12 regulations that pose unnecessary burdens on the industry– the “dirty dozen” – which affect whether credit unions can change their fields of membership, whether their members can transfer money from savings accounts more than a certain number of times per month, and more. Details about the 12 regulations are available on the NAFCU website.

NAFCU’s 2013 Regulatory Compliance Seminar – Watch it LIVE!

Written by Michael Coleman, Regulatory Compliance Counsel

It’s that time of year again, summer is over and we’re moving into the fall, the Redskins are floundering, and NAFCU’s 2013 Regulatory Compliance Seminar is right around the corner.

The current regulatory environment has placed an immense burden on the credit union industry (I’ve been trying to kick-start the term “Reg-pocalypse” with limited success) and the need to stay informed and up to date on compliance issues is greater than ever. I don’t know about you, but I try to avail myself of every opportunity to learn something, read something, watch something, or participate in something that will help me understand current compliance issues faced by credit unions. Which brings me to my shameless plug.

This year’s Regulatory Compliance Seminar has sold out. If you were unable to register and won’t be able to join us in Nashville, Tennessee, fear not! To accommodate the growing demand for the important information and education provided at Regulatory Compliance Seminar, we're launching a Live Video Streaming option as a pilot program which will allow you (and anyone from your credit union) to attend virtually.

How will Live Video Streaming of Regulatory Compliance Seminar work?

• Register for the 2013 Regulatory Compliance Seminar Live Video Streaming.
• Receive an email confirming your registration and providing login information to access the live video stream during the seminar.
• Test your systems to access live streaming before the start of the seminar.
• Visit the Live Video Streaming link each day during the time of the courses (note: all times are in Central Time), using your login information to view the live stream. A link to course handouts is available after login.
• The sessions/courses will be available on-demand starting October 31, revisit the material with your same login information. (Link to on-demand course recordings to be provided after the live event).
• Anyone attending the seminar in-person in Nashville will get access to the on-demand recordings of the courses after the seminar.
• NCCOs earn the same 24 CEUs for watching all of the live streaming courses as they do for attending all courses in-person.

How much does the Live Streaming Cost? The registration fees for the streaming option are:

• NAFCU Member: $1,575
• Nonmember NCCO: $2,075 – Note: Nonmember NCCOs must call NAFCU’s Member Service Center at 800-344-5580 to register and get the discounted pricing.
• Nonmember:$2,575

Don’t miss this great opportunity to participate in NAFCU’s 2013 Regulatory Compliance Seminar, visit our website for more details and sign up today!

Have a great weekend!

September 2013 NCUA Report; NAFCU Member Resources - Consolidated Regulatory Text and Commentary for the CFPB’s Mortgage Rules

Written by Michael Coleman, Regulatory Compliance Counsel

NCUA Report. The September 2013 NCUA Report is now available, you can find it here. This month's issue covers: 

• Office of Consumer Protection Report: Overview of New Mortgage Rules
• Chairman's Corner: The Financial Crisis, Five Years Later: Lessons Learned
• Office of Consumer Protection Report: Low-Income Credit Union Initiative Boosts Community Investment
• Board Perspective - Michael E. Fryzel: A Year to Remember
• Board Perspective - Rick Metsger: May You Live in Interesting Times
• Region III Report: Understanding Enterprise Risk Management
• Office of Examinations and Insurance: Credit Union Membership, Loans Grow in Second Quarter
• Office of Small Credit Union Initiatives Report: Introducing FAQ+, A New Search Engine for Credit Unions

As always, the report includes some interesting articles and information, it is worth a read. This edition features NCUA Board Member Metsger’s first Board Perspective, here is an excerpt I thought was interesting and shows a great attitude as these are most certainly “interesting times” in credit union land:

“While preparing to leave Oregon for my new assignment in Washington, D.C., a long-time friend noted the many dynamic changes and challenges in today’s financial services marketplace, wished me well and parted with the observation: “May you live in interesting times.”

We have all heard the phrase before. It is purported to be an old Chinese proverb, seemingly positive in nature. Dig deeper into its origins, however, and evidence advances the theory it was actually one of three ancient curses, each imparting increased severity upon the designated target.

As the newest member of the National Credit Union Administration Board, I am mindful that how we decide to interpret a message goes a long in way in determining the direction and the outcome of our actions. Like my friend, I choose to observe these “interesting times” as an opportunity, not a curse, and a chance to make a difference in advancing the vital role credit unions play in the lives of so many Americans.

[…]

In the months ahead, I will use this column to discuss my perspective on issues as they come before the Board. I look forward to an open and robust dialogue on each of these issues and value your insights, observations and opinions. Together we have an opportunity to make these “interesting times” one of the best times for the American financial services consumer.”

The NCUA report also contains an overview of the CFPB’s mortgage rules which the article notes will be the first in a series of articles to help credit unions comply with the impending mortgage rules.

NAFCU Member Resource - Consolidated Regulatory Text and Commentary for the CFPB’s Mortgage Rules.

And speaking of helping credit unions to comply with the CFPB’s mortgage rules, NAFCU’s compliance division has put together a great member resource (login required) which will hopefully save you quite a few headaches.

The CFPB's mortgage rules amended several federal regulations (Regulation Z, Regulation X, Regulation B), and many of the individual regulatory sections were amended by different final rules. As a result, it is difficult to determine the complete picture of the requirements when the rules become effective.

To solve this problem, NAFCU has consolidated the regulatory text and commentary for each amended (and added) regulatory section from each of the CFPB's final mortgage rules. The consolidated regulatory text and commentary show how the regulatory sections will look when the final rule(s) are effective in January 2014.

Check out our new webpage where you can download the consolidated regulatory text of each individual amended section or you can download the entire consolidated final rule as amended! You can also link to the consolidated text from the NAFCU Mortgage Rules webpage. Hopefully you will never have to use this stress reduction kit again! 

 

NCUA’s Regulatory Alert on Regulation B Appraisal Disclosure and Delivery Requirements; Regulatory Relief Continued

Written by Bernadette Clair, Regulatory Compliance Counsel

Earlier this week, Steve mentioned NCUA’s Regulatory Alert on the Regulation B Appraisal Disclosure and Delivery Requirements. The alert summarizes requirements under the CFPB’s Equal Credit Opportunity Act (ECOA) Valuations Rule (effective January 18, 2014).

Some of the areas highlighted by the alert include the types loans covered by the rule, what is or isn’t considered a “valuation” and sending valuation copies promptly upon completion. The alert also provides the following steps for complying with the rule:

• You must notify the applicant in writing within three business days of application of the right to receive a copy of any appraisal developed in connection with the application. Appendix C to the rule includes sample text for this disclosure.

• If you have an application that was not originally going to be secured by a first lien on a dwelling and you later determine that it will be secured by a first lien on a dwelling, then you have three business days after you determine the change has occurred to notify the applicant about the right to receive appraisals.

• When processing an application for a closed-end loan, you must deliver copies of appraisals and other written valuations “promptly upon completion,” or three business days before consummation, whichever is earlier.

• When processing an application for an open-end loan, you must deliver copies of appraisals and other written valuations “promptly upon completion,” or three business days before account opening, whichever is earlier.

• You cannot charge the applicant for fees for photocopying or to cover the cost of postage to mail copies of appraisals or other written valuations you provide. However, you can charge a reasonable fee to reimburse the cost of developing an appraisal or other written valuation, unless applicable federal⁵ or state law prohibits or otherwise restricts it. You cannot condition providing copies on payment of this fee.

• For applicants who waive the right to receive the required copies at least three business days before consummation or account opening, you must provide the copies either at, or prior to, consummation or account opening. (Footnote omitted)

Refer to the alert  for complete details.

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Regulatory Relief. In a letter sent to NCUA on Monday regarding the agency’s 2013 regulatory review, NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt raised numerous issues that deserve the agency’s immediate attention.

Related to today's blog post, one area addressed is the need for NCUA to update its appraisal regulations in light of the CFPB’s ECOA Valuations Rule.  Currently, federal credit unions are exempt from the appraisal requirements of Regulation B, as current section 1002.14 contains an exemption from these requirements for credit unions subject to NCUA’s regulation section 701.31(c)(5) regarding the provision of appraisal copies.

The ECOA Valuations Rule removes this exemption. Here is from the letter:

"Starting on January 18, 2014, credit unions will be required by Regulation B to provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. Unless NCUA section 701.31(c)(5) is amended, credit unions will also have a duty to make, at the request of the member, copies of appraisals used for that member’s real-estate related loan application available for up to 25 months, regardless of whether the credit is secured by a first lien on a dwelling.

...

In order to update NCUA regulations to reflect a new world where credit unions are under the rule of Regulation B starting January 18, 2014, NCUA should, at a minimum, change the scope of 701.31(c)(5) to include only subordinate lien loans that fall outside the scope of Regulation B's requirements. This would ensure that for all first lien loans on a dwelling, a member would receive an appraisal provided by the credit union pursuant to section 1002.14 as amended. For all subordinate lien loans, the member would still be able to request a copy of the appraisal from the credit union."

Click here to download NAFCU's comment letter.

Regulatory Relief; NAFCU's Congressional Caucus; August Compliance Monitor

Written by Michael Coleman, Regulatory Compliance Counsel

Programming Note: As Steve mentioned yesterday, for the month of August, we'll be blogging on Monday, Wednesday and Friday rather than our usual every business day.

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Regulatory Relief. We blog a lot about the regulatory burden faced by credit unions today (it even has its own category on our blog), and I have been known to describe the current regulatory environment as “The Reg-pocalypse.” Credit union professionals know that this is a serious issue facing the credit union industry. Just ask any compliance officer, they’ll probably just point to the phone book(s) sized set of recent final rules they are trying to wade through. That being said, it’s one thing for me to sit at my computer and shout into the vast expanse of the internet blogosphere about the issue, but the real question is: “What can we do about it?”

Which brings me to the issue of regulatory relief. My colleagues here at NAFCU tirelessly advocate on behalf of credit unions to provide much needed regulatory relief to the industry. On Wednesday July 31st NAFCU’s Vice President of Legislative Affairs Brad Thaler sent a letter to Speaker Boehner and Minority Leader Pelosi in support of the regulatory relief efforts found in the Regulations from the Executive in Need of Scrutiny (REINS) Act (H.R. 367), here is an excerpt:  

“The REINS Act would make an important step toward regulatory relief by requiring any executive branch regulation with an economic impact in excess of $100 million as scored by the Office of Management and Budget to come before Congress for an up-or-down vote before it could be enacted. NAFCU believes putting this legislative process into place could help ensure additional accountability from the Administration and Congress regardless of which political party is in the majority.

As Congress looks for ways to cut down on duplicative and over-burdensome federal regulation, we urge you to also support efforts to provide regulatory relief for credit unions such as legislation introduced by Representative Gary Miller—H.R. 2572, the Regulatory Relief for Credit Unions Act of 2013. This legislation reflects key provisions we shared with Congress on February 12th of this year as part of NAFCU’s five-point plan for credit union regulatory relief.”

As Brad points out, the REINS Act is definitely a step in the right direction. He also referenced NAFCU's Five-Point Plan for Regulatory Relief which calls on Congress to provide comprehensive broad-based regulatory relief for credit unions, and H.R. 2572 introduced by Representative Gary Miller (R-CA). For additional information on the Miller bill and NAFCU's Five-Point plan, make sure to check out NAFCU's Regulatory Relief webpage, and this blog post.

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NAFCU's Congressional Caucus. You might still be asking yourself: “OK, regulatory relief is a big deal, but what can my credit union do about it?” NAFCU’s 2013 Congressional Caucus is just around the corner - September 8-11 in Washington, D.C.  Caucus is the perfect time for your credit union to meet with your Senators and Representatives and let them know about the increasing regulatory burden on your credit union. Don’t miss this opportunity to make your credit union’s voice heard! Sign up today.

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August Compliance Monitor. The latest NAFCU Compliance Monitor is available for download (NAFCU login required). This month’s issue contains the following in depth articles:

• Small Creditor Portfolio Exemption for QMs Explained
• Lessons Learned from the CFPB’s Recent MILES Enforcement Action

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Have a great weekend everyone!  

Representative Miller Introduces H.R. 2572: Regulatory Relief for Credit Unions Act of 2013

Written by Steve Van Beek

On Friday, Representative Gary Miller (R-CA) introduced H.R. 2572 - the Regulatory Relief for Credit Unions Act of 2013. NAFCU's legislative and regulatory teams have worked extremely hard with Representative Miller's staff to introduce this bill and will continue to push for additional support in the House. 

The provisions in the Miller bill, as reflected in NAFCU’s five-point plan, would:

• allow NCUA to grant federal credit unions a waiver to follow a state rule instead of a federal one in certain situations;

• authorize NCUA to step in where appropriate to modify a CFPB rule affecting credit unions;

• establish a risk-based capital system for credit unions;

• require that NCUA and CFPB revisit cost/benefit analyses of rules after three years so they have a true sense of the compliance costs for credit unions;

• require NCUA to conduct a study of the Central Liquidity Facility and make legislative recommendations for its modernization;

• give credit unions better control over their investment decisions and portfolio risk; and

• provide credit unions parity with FDIC-insured institutions when it comes to deposit insurance coverage on Interest on Lawyers Trust Accounts (IOLTAs).

For additional information on the Miller bill and NAFCU's Five-Point plan, head to NAFCU's Regulatory Relief webpage.

And, be sure to view a special video from NAFCU's President and CEO Fred Becker:

If the video above does not work - click here to view.

Do You Support the Regulatory Accountability Act of 2013? NAFCU Does.

Written by Steve Van Beek

On Thursday, NAFCU joined 87 other trade associations in sending letters of support to Congress for the Regulatory Accountability Act of 2013 (H.R. 2122 and S. 1029). Here is a snippet from the House letter (identical language in the Senate letter):

"Our regulatory process has not been updated in more than six decades, and as a result we are seeing a rising number of massive, costly rules that breed uncertainty, drive up costs, and stifle hiring and investment. This legislation, which would modernize the 66-year old Administrative Procedure Act, would improve the process by which federal agencies promulgate regulations to improve accountability and the integrity of the rulemaking process.

Small and large businesses alike consistently cite growing regulatory burdens and the uncertainty that occurs when badly-written regulations must be corrected through years of litigation as the most significant obstacles to new hiring."

This isn't just a financial institutions issue - check out some of the other signatories of the letters:

• Aeronautical Repair Station Association
• Associated Wire Rope Fabricators
• Flexible Packaging Association
• Shipbuilders Council of America
• Window & Door Manufacturers Association

A pretty diverse crowd. 

What would the Regulatory Accountability Act of 2013 do? It would make substantial changes to the rulemaking process used by federal regulators - including these three improvements that I personally endorse (from H.R. 2122):

"(b) RULE MAKING CONSIDERATIONS - In a rule making, an agency shall make all preliminary and final factual determinations based on evidence and consider, in addition to other applicable considerations, the following:

....

(4) Whether existing rules have created or contributed to the problem the agency may address with a rule and whether those rules could be amended or rescinded to address the problem in whole or part."

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"(c) ADVANCE NOTICE OF PROPOSED RULE MAKING FOR MAJOR RULES, HIGH-IMPACT RULES, AND RULES INVOLVING NOVEL LEGAL OR POLICY ISSUES - In the case of a rule making for a major rule or high-impact rule or a rule that involves a novel legal or policy issue arising out of statutory mandates, not later than 90 days before a notice of proposed rule making is published in the Federal Register, an agency shall publish advance notice of proposed rule making in the Federal Register."

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"(k) RULE MAKING GUIDELINES - 

...

(2) The Administrator of the Office of Information and Regulatory Affairs shall also issue guidelines to promote coordination, simplification and harmonization of agency rules during the rule making process and otherwise. Such guidelines shall assure that each agency avoids regulations that are inconsistent or incompatible with, or duplicative of, its other regulations and those of other Federal agencies and drafts its regulations to be simple and easy to understand, with the goal of minimizing the potential for uncertainty and litigation arising from such uncertainty."

***

To sum up - those three provisions would:

1. Require regulators to consider their existing rules when writing new regulations;
2. Issue an advanced notice of proposed rulemaking (ANPR) prior to proposing a major rule; and
3. Require regulators to avoid regulations that are inconsistent or incompatible with other regulations and draft regulations in simple and easy to understand language.

Again - NAFCU was happy to sign on to the letters. 

NAFCU Urges Regulatory Coordination; FSOC Annual Report

Written by Michael Coleman, Regulatory Compliance Counsel

There is no denying the fact that regulatory burden is a major issue faced by the credit union industry. Even so, I still sometimes feel like the boy who cried wolf when I am constantly talking about regulatory burden and compliance issues faced by credit unions. But then I remind myself that there actually are wolves out there, and they have really big teeth. As I mentioned in this blog post a while back, I tend to speak in quaint colloquialisms from time to time, and I have been known to make up a word or two as well. If you have ever spoken with me in person or on the phone, you might have heard me refer to the current regulatory environment as "The Reg-pocalypse."  

With this in mind, NAFCU is constantly advocating on behalf of our members to try and reduce regulatory burden and provide regulatory relief for credit unions. For example, NAFCU's Five-Point Plan for Regulatory Relief calls on Congress to provide comprehensive broad-based regulatory relief for credit unions. However, in addition to legislative measures,  there are other steps which can be taken to help provide regulatory relief to the credit union industry. 

As we mentioned in this blog post, the Financial Stability Oversight Council (FSOC) recently issued their 2013 Annual Report detailing the activities of the Council, significant market and regulatory developments, and potential emerging threats to the financial stability of the United States. However, notably absent is any discussion of regulatory burden on financial institutions. This is incredibly unfortunate as the FSOC has a statutory mandate from Dodd-Frank to facilitate coordination between federal regulators.

On May 20th, Fred Becker, NAFCU's President and CEO, sent a letter on the FSOC and regulatory coodination to Sen. Tim Johnson, Chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Sen. Michael Crapo, ranking member of the Senate Committee on Banking, expounding the need for the FSOC to take seriously its duty to facilitate regulatory coordination, here is an excerpt: 

"As the tide of regulation rises, there has never been a more critical time for the FSOC, led by Secretary Lew, to facilitate regulatory coordination among its member regulators. This duty includes facilitating information sharing and coordination among the member agencies of domestic financial services policy development, rulemaking, examinations, reporting requirements and enforcement actions. As outlined in the attached letter to then Treasury Secretary Timothy Geithner in June of 2012, under the Dodd-Frank Act the FSOC is effectively charged with ameliorating weaknesses within the regulatory structure therein providing a safe and more stable system as a whole. NAFCU appreciates the committee’s focus on the activities of the FSOC and looks forwarding to learning more about the steps that have been taken to avoid duplicative and over burdensome regulation of our nation’s credit unions."

A similar letter was also sent on May 21st to Rep. Jeb Hensarling, the Chairman of the House Financial Services Committee, and Rep. Maxine Waters, the ranking member of the House Financial Services Committee. Here's hoping we see some relief! 

H.R. 1077, the Consumer Mortgage Choice Act; QM Points and Fees Caps - Part 3

Written by Michael Coleman, Regulatory Compliance Counsel

Last week we blogged about the CFPB’s Small entity compliance Guide for the Ability to Repay/Qualified Mortgage final rule, as well as some NAFCU resources on the CFPB’s final mortgage rules, specifically about the points and fees caps contained in the qualified mortgage final rule.

Today we’d like take a look at H.R. 1077, the Consumer Mortgage Choice Act, introduced by Representative Bill Huizenga on March 12, 2013. If you have ever talked with me on the phone (particularly about some kind of a violation/non-compliance with a regulation), you might have heard me utter one of my favorite sayings: “you can’t unscramble those eggs.” Well, we mere-mortal compliance officers might not be able to unscramble those eggs, but Congress sure can.

The final rule on ability to repay and qualified mortgages section 1026.43(e)(3) contains restrictions on points and fees for qualified mortgages. H.R. 1077 would amend the Truth in Lending Act (TILA) definition of “points and fees.”

On May 3rd, Dan Berger, NAFCU’s Executive Vice President of Government Affairs, sent a letter on H.R. 1077 to Rep. Jeb Hensarling, the Chairman of the House Financial Services Committee, and Rep. Maxine Waters, the ranking member of the House Financial Services Committee, here’s an excerpt:

“As currently defined, “points and fees” include, among other charges, fees paid to affiliated title companies, salaries paid to loan originators, amounts of insurance and taxes held in escrow, loan level price adjustments, and payments by lenders to correspondent banks, credit unions and mortgage brokers in wholesale transactions.  As a result of this troublesome definition, many affiliated loans, particularly those made to low- and moderate-income borrowers, would not qualify as Qualified Mortgages (QMs) and would be unlikely to be made or would only be available at higher rates due to heightened liability risks.  Consumers would lose the ability to choose to take advantage of the convenience and market efficiencies offered by one-stop shopping.

The Consumer Mortgage Choice Act would make important changes that would:

- Exclude title charges from “points and fees” definition. 

- Prevent double-counting of loan officer compensation.  

- Clarify that escrow charges should be excluded from any calculation of “points and fees.”

- Exclude loan level pricing adjustments (LLPAs).     

- Exclude lender-paid compensation to mortgage brokers. 

 Taken together, these changes would make important improvements to the definition of “points and fees” used to determine whether a loan meets the QM test.” 

 Contact your members of Congress. My colleague Katie Marisic – NAFCU’s Director of Political Affairs- wrote a great guest blog a while back about the importance of reaching out to your members of Congress on important issues that affect credit unions.  As Katie pointed out, legislative advocacy is an important means by which credit unions (and their members) can help stem the tide of regulatory burden. And every now and then, a bill is introduced that will do just that – help credit unions by directly reducing regulatory burden. Or as I like to say: “unscrambling those eggs.” Check out NAFCU's Legislative Resource Center, it has links to help you find your Representative, as well as other great resources such as NAFCU’s Grassroots Action Network. 

I don’t know about you, but I would much rather be spending my free time watching the Capitals playoffs than worrying about the points and fees calculations for qualified mortgages. 

What is Three-Dimensional Compliance?

Written by Steve Van Beek

Last week, I shared two slides from my upcoming presentation How the CFPB Impacts Your Credit Union at NAFCU's Directors Conference in Asheville, NC. One of the key takeaways will be the idea of Three-Dimensional Compliance.

So, what is Three-Dimensional Compliance? In short, it is a new way to think about the role compliance plays in the credit union. Here is a snippet from my article in the May/June The Federal Credit Union magazine:

"Beyond the Checklist

The creation of the CFPB means that credit unions need to review the role compliance plays in the credit union. Often the compliance officer is brought into a discussion late in the process, and her job is to approve or disapprove a particular action based on the regulatory requirements. Going forward, this “yes or no” approach to compliance will need to change. The CFPB’s focus is principle-based as well as requirement-based. Not only will credit unions need to determine if their product or service is compliant with laws, regulations and guidance, but they will also need to expend resources to document that the product or service provides a benefit to members.

When new requirements are issued, credit unions won’t be able to simply work through a checklist of new requirements and make tweaks to their products and disclosures. They will also need to undertake a three-dimensional analysis of the product or service, asking: 

• Why is the regulator taking this action?

• How were consumers impacted by the prior practices?

• How do consumers view the product or service?

• How does the credit union market the product or service?

• Does the credit union’s marketing of the product or service correspond with how the product or service is used by members? 

In other words, when regulators identify a product or service that has been abused (by either consumers or financial institutions), credit unions need to complete a full 360-degree review of their offerings in order to reduce their compliance, reputation and strategic risks."

You can find the full article here.

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Reading the CFPB's Tea Leaves. If that message sounds like something your senior managers or Board needs to hear, be sure to pass along information about NAFCU's Annual Conference - specifically our Regulation & Economy Track. We'll be meeting in Boston from July 9-13 and you can see the description of my talk below:

Reading the CFPB’s Tea Leaves 

The pace of the Consumer Financial Protection Bureau’s rulemaking has put credit unions on the defensive. For example, the CFPB’s final mortgage regulations will require a complete overhaul of credit unions’ mortgage operations. Hear which requirements will need special time and attention from your staff and gain best practices to stay on track with your implementation plan. And, just as importantly, hear which areas the CFPB is looking at next. Today’s scrutiny leads to tomorrow’s regulatory requirements. We’ll discuss the CFPB’s focus on prepaid cards, private student lending, overdraft protection programs and checking account disclosures – including what steps your credit union can take now to prepare for new requirements. 
Steve Van Beek, Esq., NCCO, Director of Regulatory Compliance, NAFCU

Full information on the conference can be found here.

What Does Your Board Need to Know About the CFPB?

Written by Steve Van Beek

The headline above was my goal when I created a presentation for NAFCU's Board of Directors & Supervisory Committee Conference next month in Asheville, North Carolina. The first point is that the CFPB's regulations apply to all credit unions.

After that, you can see my overview and key takeaway slides below.

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It's Not Too Late. Your Board can still sign up for the conference - May 15-17 in Asheville, NC - and we'll be having similar discussions at NAFCU's Annual Conference - July 9-13 in Boston, Massachusetts.  

Here is another question: How are you informing and updating your Board on the CFPB's actions (and potential actions)? 

2013 HMDA Getting it Right Guide; New NAFCU Calendar; Reg Alert on Escrow Proposal

Written by Steve Van Beek

2013 HMDA Guide. Yesterday, the Federal Financial Institution Examination Council (FFIEC) issued the 2013 HMDA Getting it Right! guide. According to the main page:

"The 2013 edition reflects the transfer of authority over Regulation C from the Federal Reserve Board to the Consumer Financial Protection Bureau. Appendix D, comment 1003.2 (Financial Institution)-2 is updated with the asset-size threshold exemption applicable to collection of 2013 data. There are also minor changes to the general text of the Guide, including updates to Sources of Geographic Information and Submitting the LAR."

You can find the full PDF of the 2013 Guide here.  

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Long Time Coming. Now, you may be wondering when the last version of the Guide was issued?  2010.  The 2011 version would have been the lame duck one when the Federal Reserve still had authority for Regulation C (HMDA). However, there was no guide issued. On July 21, 2011, the CFPB took over Regulation C and they failed to release a guide in 2012.  Fortunately, in year two, the CFPB found the time to update the Guide and provide guidance to HMDA-reporting institutions.

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Garbage In, Garbage Out? The CFPB is a self-described "data-driven" agency. If you doubt it, take a read through this Bloomberg.com story: U.S. Amasses Data on 10 Million Consumers as Banks Object. To me, if you want to be data-driven - the best first step is to make sure your regulatory requirements are clear and understandable so that the data you collect (whether it be consumer complaints, HMDA data, or anything else) is as reliable as possible. But, that's just me.  

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NAFCU Calendar.  NAFCU has a new calendar on our website that features:

• Compliance Deadlines;

• Important Regulatory Dates;

• Education & Conferences;

• CU Research Survey Deadlines; and

• Other Important Dates.

The calendar allows you to navigate month-by-month, click to find more information and add dates to your own calendar. For example, the "more information" link on the June 1st Escrow Changes Deadline includes this information:

CFPB Compliance Deadline: Escrow Requirement

Description:

Amended escrow requirements for higher-priced mortgage loans. Added a new small creditor exemption for credit unions that meet a four-part test.

Regulatory Text: 12 CFR 1026.35

NAFCU Compliance Blog: Mortgage Reform - Escrows

NAFCU Resources: www.nafcu.org/mortgagerules/#escrow

Download the latest full Compliance Calendar, including proposed regulations, past deadlines and more.

Date:Jun 01, 2013    

Add to Calendar                                             Back to Calendar

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NAFCU Members. The Mortgage Rules webpage includes NAFCU's Regulatory Alert on the CFPB's recent proposed rule. The proposal was published in the Federal Register yesterday and only provided 15-days for comments (comments to NAFCU on the Regulatory Alert are due on Wednesday, April 24).  

Regulatory Relief: NAFCU Testimony on the Hill; Rep. Miller Announces Legislation. CFPB Issues ATR/QM Small Entity Compliance Guide.

Written by Michael Coleman, Regulatory Compliance Counsel

Yesterday, Bob Burrow, president and CEO of Bayer Heritage FCU in Proctor, W.Va., testified on behalf of NAFCU before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit at a hearing on regulatory relief for credit unions. Mr. Burrow’s testimony stressed the need to provide credit unions the regulatory relief outlined in NAFCU’s five-point plan for credit union regulatory relief. You can find Mr. Burrow’s testimony here. For more details, see this NAFCU Today story.   

Also, House Financial Services Committee Vice Chairman Gary Miller, R-Calif., announced during a the hearing that he will introduce a credit union relief bill that draws on several concepts presented in NAFCU’s five-point plan. The legislation is likely to include efforts to implement a risk-based capital system for credit unions and give the NCUA flexibility in critical areas such as the ability to grant parity to a federal credit union on a broader state rule. Take a look at this NAFCU Today story for some more details.

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ATR/QM Small Entity Compliance Guide. Yesterday, the CFPB issued a Small Entity Compliance Guide for the Ability to Repay/Qualified Mortgage final rule. As we mentioned in a blog post last week, the CFPB plans to issue more compliance guides (we hope) in the coming weeks. You can sign up to receive their announcements of the release of these materials on the CFPB’s regulations website (enter your email in the top right-hand corner). For now, you can also find the ATR/QM guide on the CFPB’s site for the ATR/QM rule. We will blog about the ATR/QM small entity compliance guide in more detail in future blog posts. 

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In January, I took a vacation with my family to Iceland. The main goal was to catch a glimpse of the Northern Lights, which can be difficult to see at times depending on the conditions (cloud cover, solar activity, etc.) Thankfully, there was one night on the trip with perfect conditions, and we were treated to a phenomenal display. Now I can check it off my bucket list! Below are a couple photos (which don't do it justice), enjoy! 

I'm the really blurry one on the left. 

CFPB to Begin Issuing Information to Help Credit Unions Comply with Mortgage Rules

Written by Steve Van Beek

Last week I was at a conference with other credit union attorneys and I noted the only parts of the CFPB's Implementation Plan for the new mortgage rules was the press release (sent on February 13th) and one blog post on the preliminary rural and underserved counties list.

Well, the CFPB must have been listening because on Friday afternoon they announced their plans to provide their first substantive guides to the mortgage rules in the upcoming weeks.  Below is from their email:

"In the coming months, we’ll release plain language compliance guides, updates of the official interpretations, examination procedures, and other materials. We’re planning to release the first set of materials next week. 
 
If you’re in the mortgage industry or just want to know what we’re doing to help them get ready, sign up for our regulations-specific email list. The signup form is in the upper-right section of the page. 
 
consumerfinance.gov/Regulations 
 
A good implementation plan reduces confusion and costs for industry. That means less time figuring out what the rules mean and more time designing business practices that serve consumers and follow the rules. That’s a market that works better for everyone."

I'd encourage you to sign-up for the announcements and set aside time to review the materials the CFPB provides. 

***

Back in early 2013 (just before the rules were finalized) the CFPB reached out to NAFCU for input on their Implementation Plan for the Mortgage Rules. While I was hopeful at the time, as the days passed by I became more convinced the CFPB missed a huge opportunity by waiting so long to begin communicating with compliance officers on the new rules.

Below are the suggestions I sent to the CFPB back in January:  

• "Applicability.  It is very important to credit unions that the CFPB be specific regarding which new requirements apply to which types of mortgage products.  Credit unions usually think in terms of the mortgage products they offer and not which regulation might apply.  The more the CFPB can do to make distinctions in their communications (and in the actual regulation and commentary), the less burden credit unions will face.  Some of the distinctions that would allow credit unions to know if the regulations apply to their product are included below. 
  • Open-End Credit versus Closed-End Credit
  • First lien versus Subordinate lien
  • Principal dwelling versus Any dwelling
  • Real-estate secured versus secured by personal property (which might be a dwelling – e.g., manufactured homes, mobile homes)

• Fact Sheet for Compliance Officers.  In the CFPB’s prior releases, there have been Fact Sheets for consumers and Fact Sheets for the press.  It would be very helpful if the CFPB released a Fact Sheet for compliance officers. 

• Ask CFPB & Prior Q&As.  Compliance officers should have an avenue to ask questions about the applicability and requirements of the new regulations.  The CFPB would then be able to post these questions and answers on their website to provide guidance to other compliance officers.  Very similar to the process the CFPB already uses to provide information to consumers. 

• One-Page Document with Compliance Dates.  It would be very helpful if the CFPB created and released a one (or two) page document that contains the compliance dates for all the new requirements.

• Webinars and Small Entity Guides.  These are very helpful to credit unions.  However, in order to have the greatest impact – they need to be released in a timely manner and clearly explain the applicability of the new rules.

• Citations.  Whenever possible, the CFPB should use citations when discussing new requirements so that credit unions can conduct further research and analyze the underlying regulatory text, any staff commentary and the preamble to the new regulatory requirement. 

• Annotated Model Forms.  The CFPB’s proposed model forms for the TILA-RESPA Integrated Disclosures included annotated model forms which allowed users to click on various sections of the model form and see the underlying citation and a link to the proposed rule.  Including this feature with the final rules would be extremely beneficial to credit unions – especially as they work with third-party forms providers.  The annotated model forms will allow credit unions to show their vendors the underlying regulatory requirement and why the particular language or formatting is required. 

• Break Up Topics/Changes Into Manageable Sections.  One of the aspects that NAFCU has found most effective in explaining large changes to regulations (such as from the Credit CARD Act or prior RESPA reform) has been to break up the new requirements in manageable pieces.  For example, the mortgage servicing sections could be clearly broken up in the following sections: (1) adjustable-rate notices; (2) periodic statements; (3) error resolution procedures; (4) information requests); etc.  This allows credit unions, who have very limited compliance staffs, to focus on certain changes initially and move on after implementing those changes rather than trying to comprehend the entire regulation at once."   

We'll have to wait and see how they do overall, but they certainly didn't make educating compliance officers a focus of their new rules. Instead, they worked the media angle and touted the past abuses by certain mortgage lenders and servicers while simply dumping the new rules and forcing everyone to wade through the 3507 pages.

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And, I must include your Moment of Zen (or at least mine) for today. Go Blue!

CFPB Issues Final Rule to Remove ATM Fee Disclosure; The Cost of Compliance

Written by Steve Van Beek

Yesterday, the CFPB announced - via blog post - that they were issuing a final rule to amend Regulation E to remove the federal "on the machine" requirement for ATM fee disclosures.  Kudos to the CFPB for reading our blog post from last week and taking action to remove this unnecessary regulatory burden (the CFPB's inaccurate regulation; Congress had removed the requirement from the Electronic Funds Transfer Act three months ago).

Of course, it wouldn't be a CFPB blog post without a plea for consumers to submit a complaint.  Here is how the blog post ends:

"Congress recently amended the law about ATM fee disclosures to eliminate the sticker requirement. Now the CFPB is following the law by changing these rules. While this change means that consumers may no longer see a sticker on the ATM telling them that the ATM owner may charge a fee, the information about these charges, including the amount of the charge, will still appear on the ATM screen or a printout. The consumer will be able to cancel the ATM transaction without paying a dime.

At the CFPB, we work to ensure that consumers have the information they need to make informed decisions about their financial products and services. If you have had a confusing experience with ATM fees, you may contact the CFPB to tell us your story or submit a complaint."

Importantly, the final rule will be effective immediately upon publication in the Federal Register. While it took the CFPB three months to follow Congress' command, at least they took the appropriate step and made the rule effective immediately.

***

Cost of Compliance.  Earlier in the week, the CFPB issued a blog post indicating they were studying the cost of complying with consumer financial regulations.  Below is the language from the post:

"We’re studying the costs of complying with consumer finance regulations

Banks, credit unions, and other financial services providers are concerned with compliance costs – how much it costs to comply with financial regulations – and we’re interested as well. Regulations can have many benefits for consumers, but the benefits sometimes come at a cost.

What we want to know
What are the extent and nature of compliance costs?

So, what are we doing?
Our Research, Markets, and Regulations team is studying the costs related to rules we inherited from other agencies. We want to increase public understanding of compliance costs. As a first step, we will talk to banks across the country about the costs they incur to comply with consumer regulations for deposit products and services. These include products like checking accounts and debit cards, which nearly all banks offer and most consumers use. Through our research, we hope to become better and smarter regulators."

Now, you may be thinking - with all the new regulatory requirements - the last thing we have time to do is spend time and resources quantifying the time and resources we're expending on complying with regulations!!

A completely understandable point. But, keep in mind that you don't need to respond directly to the CFPB or conduct a full analysis of your information.  NAFCU's research division collects information on a monthly basis from NAFCU members and uses this information to help inform NAFCU comment letters, letters to the Hill and outreach to the media.

Each month, NAFCU's research division sends out an Economic and CU Monitor survey which is summarized and reported in the Economic and CU Monitor.

So, if you don't have the time or resources to provide a full "compliance cost" evaluation - consider going to NAFCU’s Economic and CU Monitor page and complete the online survey each month. It only takes 15 minutes and you don't need to answer questions that aren't applicable or that you where you don't have the information at hand.

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Have a great weekend!  And for all those at Compliance School this week - thanks for an outstanding week!  

Want to Give the Regulators a Piece of Your Mind? There's an APA for That

Written by Angela Meyster, Regulatory Affairs Counsel

Regulations can be costly, complicated, and troubling.  It can feel like government agencies are out of touch with the effects of their rulemaking and care little about the burdens they impose on you.  Don't you wish you could tell them how you feel, or even change their minds, before they take action?

Well, good news! The nice people in Congress gave you an outlet for your concern…worries…or… outright rage: the Administrative Procedures Act and its Notice and Comment rulemaking process.

As NAFCU regulatory affairs counsel, I rely on this process to voice member concerns and advocate on behalf of the credit union industry on a weekly basis.  But you don’t have to work for a trade association - or even be an attorney - to participate.  Anyone can write a comment letter.

***

How the notice and comment process works:

Statutory Authorization. There needs to be a statute that tells an agency to solve a particular set of problems and gives it the power to make the rules to do so. Have you heard of the Dodd-Frank Act?  Too soon?

Notice. Once the agency has identified an approach to meeting its stated goal, and has drawn up proposed rules to do so, it will provide a Notice of Proposed Rulemaking (NPRM).

Note: An agency may publish the NPRM on its website for a significant period of time before actually entering it into the Federal Register.  Think of it as an elaborate Easter egg hunt, where at the end of game you don’t get chocolate but a ton of regulations with which your credit union has to now figure out a way to comply.  Luckily here at NAFCU we have some tips on how to track regulations in the Federal Register.

This is where you come in:  This is your opportunity to digest everything the agency has put out there and formulate an opinion on it.  Usually the agency identifies specific areas on which it would like feedback, but its blanket request for comment “on any other aspect of the proposal” means that you can and should write to them about anything that concerns you about the proposed rule.

Here at NAFCU we quickly translate the convoluted legal jargon the agency has put out into something comprehensible and send it off to our members in the form of “Regulatory Alerts” for their input.  Based on this input, we write a comment letter representing the interests of NAFCU members and send it off to the agency. But we also work with our members if they want to send their own comment letters.  Every time you see a Regulatory Alert is an opportunity to get your voice heard twice.

There is certainly a benefit to voicing your concern through a trade association’s comment letter. It represents the overall sentiment of a large representative population of the industry on an issue, giving it additional clout. It also allows you to voice your opinion indirectly on a potentially delicate issue. If you don't want to make your credit union's view public - all comment letters are public information - providing your input to NAFCU can help get your message across discretely. 

Review. After the comment deadline, the agency must review the comments carefully. Often, if a comment letter contains new data, policy arguments, or hypothetical scenarios the agency did not think of in formulating its proposed regulation, the agency will either revise its proposed rule or elaborate on something that was unclear.  Bottom line: you can make a difference here. 

The Notice and Comment process is a powerful tool for stakeholders and regulators alike, although not every agency has chosen to adhere to the APA…but that’s a blog post for someone else. When it comes down to it, a lot of agencies want to hear what you have to say and it’s important for you to say it.  Many agencies lack the operational knowledge to fully understand the practical results and consequences of their regulations and that’s where the notice and comment process proves its worth.  After the agency finalizes its regulation it is an uphill climb for changes (even Congress struggles with this), so proactive measures in the proposed stages are crucial.

Here are some tips for writing effective comment letters:

• Outline of the letter: include the docket number, an introduction (tell them about yourself and why your opinion matters), and which specific aspects of the proposal on which you are commenting;

• Don’t feel compelled to comment on every aspect of a proposal - if only one part affects you, just comment on that one;

• The most persuasive feedback often includes real-world data and specificity;

• Your comments do not need to be just critical - you should express your support for any portion of the proposal you agree with; and

• Suggest alternatives that both meet the agency’s goals and reduce your compliance costs.

And, of course - provide NAFCU with your feedback on our Regulatory Alerts to help us as we attempt to educate the regulators.  

Help is Here: NAFCU’s 2013 Credit Union Compliance GPS

Written By JiJi Bahhur, Regulatory Compliance Counsel

We talk to credit unions every day. And, we hear the same concerns, fears and frustrations:

• How do we keep up?
• How do we know if this is the latest information?
• Where can I find that guidance document?
• When will someone explain this information in plain English?
• How do we get everyone on the same page without busting our limited training budget?

It is with these conversations in mind that we created the GPS and are pleased to announce the 2013 edition (with a very shameless plug).

***

NAFCU's Credit Union Compliance GPS - 2013 Edition. Hot off the electronic presses is the 2013 edition of NAFCU’s Credit Union Compliance GPS.  Written by NAFCU's compliance team, this electronic manual spans almost 500 pages and covers everything from the basic anatomy of a federal credit union to specific regulations from the NCUA, CFPB, and more.  It is the ideal companion for all credit union compliance officers and staff, consultants, vendors and attorneys.  The GPS translates complex regulatory language into plain English to help credit unions on a day-to-day basis while at that same time providing links to the applicable regulations, laws, and guidance documents.

And here’s the great part – you don’t have to be a NAFCU member to purchase the GPS.  The GPS is available to anyone and everyone at one affordable price ― $399 for NAFCU members and $499 for nonmembers. One purchase allows you to share the electronic manual with your entire credit union or business. And for no additional cost, your purchase of the 2013 GPS includes access to NAFCU’s new Scope & Applicability Charts to help you make sense of the CFPB’s new mortgage rules.

If your credit union has a prior version of the GPS (via purchase or attending a prior Regulatory Compliance School), you'd need to purchase the new 2013 GPS in order to receive the latest information. We've put a ton of time and effort into thoroughly reviewing the 2013 GPS to reflect regulatory changes. Additionally, we provided some additional bells and whistles to the 2013 GPS based on credit union feedback:

• an expanded section on the CFPB;
• user-friendly bookmarks, hyperlinks and pagination for easy navigation; and
• enhanced study tips for those studying for the NAFCU Certified Compliance Officer (NCCO) exams.

For a closer look, click here and check out our “sneak peek” documents available in the tabs to the right-hand side of the webpage (e.g., main table of contents, one page table of contents, section by section listing). 

***

NAFCU Certified Compliance Officer (NCCO) Program. NAFCU’s Credit Union Compliance GPS serves as the learning manual for NAFCU’s annual Regulatory Compliance School held each March.  NAFCU also offers a self-study program which allows anyone interested in obtaining a solid foundation of the compliance issues facing credit unions to take the four exams required to earn the NCCO designation.

If you are interested in the GPS, take a look at our new NCCO Exam Study Guide (opens as a PDF) and consider taking the next step and obtaining your NCCO.  

House Passes H.R. 749 - The Eliminate Privacy Notice Confusion Act

Note: If you are reading this post via the email delivery subscription option - you may have noticed a delay the past couple of days. We're aware of the issue but a solution isn't readily apparent. You can always find the daily blog post directly on the blog's website (just scroll down past the "Welcome Blog Post").

So, if you need your daily fix and haven't seen the email - be sure to check the blog's main website as the post is usually up there by 6 a.m.  Have a great day!

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Written by Steve Van Beek

One of the pieces of NAFCU's five point plan for regulatory relief is Operational Improvements for Credit Unions - including a specific push for elimination of unnecessary privacy notices. Yesterday, the House took an important step toward this goal by passing H.R. 749.

Now, you might be having déjà vu. Didn't the House pass a similar bill back in December?  They sure did - but since this is a new Congress, they needed to introduce and pass the bill again. And, now attention turns back to the Senate - which failed to pass similar legislation in 2012.

Below is a summary from our December 14th blog post that I've updated slightly with the information from yesterday's action.

***

The Elimination Privacy Notice Confusion Act & What it Means to Your Credit Union

Summary.  The bill - H.R. 749 - was passed by the House on Tuesday and now awaits action in the Senate.

What will the bill do?  The bill would remove the annual privacy notice requirement for certain financial institutions.  

How do we find out if we would be one of these "certain" financial institutions?  Ah, please join me (again!!) as we wander down the rabbit hole called Regulatory & Legislative Complexity (the middle name is "&" for those keeping score at home).     

The Start.  The annual privacy notice requirement comes from Section 503 of Gramm-Leach-Bliley (15 USC 6803):"

"(a) Disclosure required

At the time of establishing a customer relationship with a consumer and not less than annually during the continuation of such relationship, a financial institution shall provide a clear and conspicuous disclosure to such consumer, in writing or in electronic form or other form permitted by the regulations prescribed under section 6804 of this title, of such financial institution’s policies and practices with respect to..."  (emphasis added)."

The Bill.  The bill would add subsection (f) to Section 503 of Gramm-Leach-Bliley:

‘‘(f) EXCEPTION TO ANNUAL NOTICE REQUIREMENT.—A financial institution that—

‘‘(1) provides nonpublic personal information only in accordance with the provisions of subsection (b)(2) or (e) of section 502 or regulations prescribed under section 504(b), and

‘(2) has not changed its policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed in the most recent disclosure sent to consumers in accordance with this subsection, shall not be required to provide an annual disclosure under this subsection until such time as the financial institution fails to comply with any criteria described in paragraph (1) or (2)."

Ok - so there are two main prongs to obtaining this potential exception.  We'll take them in reverse order. 

Prong 2 - No Changes Since Your Last Privacy Policy.  This is the easier prong.  If you've changed your privacy policy, you'd need to send the annual notice so that members are aware of your new sharing practices.    

Prong 1 - Shares Information Only in Accordance with Exceptions.  This one is where things get a bit dicey.  I'll spoil the ending by letting you know that if this bill becomes law - the CFPB should be amending Regulation P and will have a great opportunity to provide clarity to everyone (credit unions, banks, consumers, etc).    

In order to satisfy Prong 1, credit unions need to share nonpublic personal information about their members "only in accordance with the provisions of subsection (b)(2) or (e) of section 502 or regulations prescribed under section 504(b)."  But, what does that mean?   

These two provisions discuss the situations where credit unions can share nonpublic personal information with nonaffiliates without having to provide the member an opt-out.  

Section 502(b)(2) - 15 USC 6802(b)(2).  This provision outlines the exception for service providers and joint marketing agreements.  It is implemented in 12 CFR 1016.13 of Regulation P.  

Section 502(e) - 15 USC 6802(e).  This provision contains the general exceptions to the opt-out requirements.  Credit unions can share information with nonaffiliated third parties in these situations - such as to service or process a transaction or at the member's request - without needing to provide the member an opportunity to opt-out.  These exceptions are outlined in 12 CFR 1016.14 & 12 CFR 1016.15 of Regulation P.   

***

Confused?  The crux is that in order to satisfy Prong 1 your credit union would need to only share information with nonaffiliates in ways that do not trigger the requirement to provide members the right to opt-out.  Prong 2 is easier in that it will be met if you have had no changes to your privacy policy since your last mailing.  

Your Homework?  Check out whether your credit union's existing privacy policy requires you to provide members the right to opt-out because your credit union shares nonpublic personal information with nonaffiliated third parties.  

Outcome 1:  If you aren't currently required to provide the opt-out to members, this bill could provide some real regulatory relief as it could remove the requirement to send your privacy policy on an annual basis.

Outcome 2:  If you currently share with nonaffiliated third parties (outside of the exceptions discussed above) and are required to provide members the opt-out, check how many nonaffiliated third parties you share with.  How valuable are those relationships?  How does that compare with the regulatory cost (and printing costs and mailing costs) of sending the annual privacy notice?  

***

Reminder:  Keep in mind that this bill still needs to work its way through the Senate.  Additionally, the CFPB would need to amend Regulation P to implement these changes and provide clarity. And, as we discussed in yesterday's blog post - it isn't always a fast process. 

Regulatory Burden: Update the Regulations, Please!

Written by Steve Van Beek

I have an irregular blog post series where I highlight specific examples of unnecessary regulatory burden.  You can see past blog posts at the bullets below:

• Regulatory Burden: Piles of Old Guidance

• Regulatory Burden: Short-Term

Regulatory Burden - Update the Regulations, Please!  Today I want to look at another form of regulatory burden. And, I'm going to use three different regulators as examples (equal opportunity!) The general gist is that when credit unions look at the regulations - they should be accurate. When Congress changes the law, regulators have an obligation to update their regulations so that entities they regulate - including credit unions - can rely on those regulations. If the regulations aren't updated promptly, the result is a textbook case of unnecessary regulatory burden.

***

Example 1 - Consumer Financial Protection Bureau. The CFPB has certainly been busy. However, I'd be shocked if they didn't notice that President Obama signed H.R. 4367 on December 20, 2012. This law removed the federal requirement for the "on the machine" ATM fee disclosures under the Electronic Funds Transfer Act (and implemented by Regulation E). If the CFPB did miss this, they should subscribe to the blog as they would see we were "hopeful" they would take swift action:

"Regulation E implements the EFTA and hopefully the CFPB will move very swiftly to amend Regulation E to ensure that everyone is aware of the change.

...

Note:  The removal of the requirement will occur after President Obama signs the bill and enacts it into law.  Thus, credit unions' litigation and compliance risk will reduce at that point.  The CFPB moving quickly to amend Regulation E and clarify the remaining requirement will be the icing on the cake.  Hopefully we don't have to wait too many birthdays."

Well, here we are on March 12, 2013 and a look to Regulation E - 12 CFR 1005.16 - clearly shows the CFPB hasn't updated Regulation E to implement the amendments to the Electronic Funds Transfer Act.

Where is the Burden? The burden lies in the fact that if a compliance officer was reviewing Regulation E they would come to the conclusion that federal law still requires the "on the machine" disclosure. Which is wrong. The Electronic Funds Transfer Act was amended by H.R. 4367 to remove the federal requirement and the CFPB just hasn't found the time to update Regulation E.

An isolated incident?  Must be due to the unique situations related to a new regulatory agency who was given so many mandates by Dodd-Frank.  Keep reading, it gets worse.

***

Example 2 - Federal Reserve Board. Dodd-Frank adjusted the "next-day availability" requirement under Regulation CC from $100 to $200. We blogged on this issue three times in 2011 and wondered why the Federal Reserve didn't issue a proposal to amend this one section of Reg CC:

"So, the Dodd-Frank change to Regulation CC - the one that bumps the $100 next day availability amount to $200 - when does it become effective?  July 21, 2011.  Some of you are thinking that you can wait, however, until the Fed finalizes its current Regulation CC rulemaking to comply.  Wrong.  Surprise, surprise, but the Fed buried this detail into its Reg CC proposal. 

Section 1086(e) of the Dodd-Frank Act increases from $100 to $200 the minimum amount of funds deposited by check or checks on a given business day that a bank must make available by opening of business on the next business day pursuant to § 603(a)(2)(D) of the EFA Act. That provision of the EFA Act is implemented in § 229.10(c)(1)(vii) of Regulation CC, and the increase is expected to take effect on July 21, 2011, regardless of whether the Board and the Bureau have amended Regulation CC. See, 76 Fed. Reg. 16,869."  [May 9, 2011 Blog Post]

***

"Regulation CC.  A change in Regulation CC from $100 to $200 for next-day availability.  The Federal Reserve has proposed changes to Reg CC that have not been finalized.  This change to $200 becomes effective though the Federal Reserve has not changed the language of Reg CC.  

....

Reality Check: Why didn't the Fed propose two different rules?  Rather than confuse the entire financial industry, the Fed could have easily issued one rule to implement the Dodd-Frank change and a separate rule to propose its other changes to Reg CC." [July 20, 2011 Blog Post]

***

"The letter is dated August 15.  Which is interesting because the change to $200 became effective July 21, 2011.  

Dodd-Frank was signed on July 21, 2010.  The Reg CC proposal was released March 3, 2011.  I'm still puzzled why the Fed did not propose two separate rules - with one proposal solely implementing the $200 change.

These are the types of headaches that do not get captured in any data on regulatory burden." [August 21, 2011 Blog Post]

A brief amendment to that last statement - these headaches do get realized by credit unions. Now, we need the regulators to realize the impact of their actions (or inactions).

Where is the Burden? A credit union searching the requirements for next-day availability under 12 CFR 229.10 of Regulation CC would find this:

"(vi) A check deposited in a branch of the depositary bank and drawn on the same or another branch of the same bank if both branches are located in the same state or the same check processing region; and,

(vii) The lesser of—

(A) $100, or

(B) The aggregate amount deposited on any one banking day to all accounts of the customer by check or checks not subject to next-day availability under paragraphs (c)(1) (i) through (vi) of this section."

And, if they followed that language - they would have a regulatory violation.  Let me repeat that - if a credit union followed the language of Regulation CC - as published by the Federal Reserve in the Electronic Code of Federal Regulations - they would have a regulatory violation as the regulation is incorrect.  If that isn't regulatory burden, I don't know what is!

***

Example 3 - National Credit Union Administration. By now, everyone is aware that the unlimited share insurance coverage for noninterest-bearing transaction accounts expired on December 31, 2012. We blogged on this issue on December 18, 2012 and then again on January 2, 2013. We also had discussions with NCUA about updating 12 CFR 745.14 of their regulations to prevent confusion by credit unions - which we discussed in our February 7, 2013 blog post.

So, here we are on March 12, 2013 and the language of NCUA's 12 CFR 745.14 still hasn't been removed. Granted, this example isn't as egregious due to the inclusion of this language "(a) Separate insurance coverage. Through December 31, 2012, a member's funds in a 'noninterest-bearing transaction account' (as defined in § 745.1(f) of this part)" - however, it still makes a credit union researching 12 CFR 745.14 follow-up with whether this has been unlimited share insurance has been extended or not. It hasn't and NCUA should make that information clear by removing 12 CFR 745.14 from their regulations.

Where is the Burden? There were so many back-and-forths on the unlimited share insurance issue - including Footnote 1 of NCUA's Letter to Credit Unions 12-CU-14 - that it is understandable that credit unions would be unsure whether or not the unlimited coverage was extended. NCUA could ease this burden by updating their regulations.

***

But, Regulating is Difficult. I'm sometimes told that I'm too harsh on regulators. That they have very difficult jobs. I get that. I'm not denying that fact (my wife works at a federal financial regulator and I know how hard she works). However, a basic job of a regulator is to make sure their regulations are clear and understandable. And, accurate.  This last part is extremely important. Credit unions need to be able to rely on the regulations that are published by the regulators. If they have to second-guess whether the regulations are accurate, they cannot perform other tasks - such as serving their members.

***

Summary.  If you are ever looking for an example of regulatory burden to show your Congressman - this blog post is a good start. We have the following:

• One example where a federal regulator failed to promptly update their regulations after Congress explicitly amended the law to remove an unnecessary regulatory burden from financial institutions.

• One example where a federal regulator failed to promptly update their regulations after Congress explicitly amended the law to provide further protections to consumers.

• One example where a federal regulator failed to update their regulations after Congress failed to extend a provision that was explicitly designed to "sunset" after a specific period of time.

I've been in the Washington D.C. area almost nine years and if I've learned one thing it is that Congress does not like to be ignored. 

Finding the New Reg Z & Reg X Requirements in the Electronic Code of Federal Regulations

Written by Steve Van Beek

A couple weeks back, we looked at finding the new homeownership counseling disclosure requirements in the Electronic Code of Federal Regulations (e-CFR).  Now that all the final rules have been published, I thought it would be good to link to all the new and amended regulatory texts so that you have a central location for finding the future regulatory language. 

Note:  Below are links to the major changes - but there are tons of other little changes and tweaks to other sections of Regulation Z and Regulation X.  Additionally, some of the link names have the same citations but they go to a different regulatory text.  For example, there are numerous links to "Appendix I" but they all go to different staff commentary.   

Regulation Z (Truth in Lending Act) - 12 CFR 1026

• New Interest-Rate Adjustment Notices - 12 CFR 1026.20

• New Points & Fees Test - Closed-end Credit - 12 CFR 1026.32

• New High-Cost APR Thresholds & Expansion of High-Cost to Open-end Credit - 12 CFR 1026.32

• New Prohibitions & Requirements for High-Cost Mortgages - 12 CFR 1026.34

• Changes to Escrow Requirement for Higher-Priced Mortgage Loans - 12 CFR 1026.35

• New Appraisal Requirements for Higher-Priced Mortgage Loans - 12 CFR 1026.35

• New Negative Amortization Counseling Requirement - 12 CFR 1026.36(k)

• Changes to Prompt Payment Crediting & Payoff Statements - 12 CFR 1026.36(c)

• New Mortgage Loan Originator Compensation, Qualifications, Training, Disclosures & More - 12 CFR 1026.36

• Periodic Statements for Mortgage Loans - 12 CFR 1026.41

• Ability-to-Repay Requirements & Qualified Mortgage Standards - 12 CFR 1026.43

Appendices to Regulation Z

• New Model Forms for Adjustable-Rate Mortgages and Periodic Statements - Appendix H

• Higher-Priced Mortgage Loan Appraisal Safe Harbor Review - Appendix N

• Illustrative Written Source Documents for HPML Appraisal Rules - Appendix O

• Standards for Determining Monthly Debt and Income - Appendix Q

Official Staff Commentary to Regulation Z - Appendix I

• New Staff Commentary for Points & Fees Test; Ability-to-Repay Requirements & Qualified Mortgage Standards - Appendix I

• New Staff Commentary for High-Cost Mortgages; Negative Amortization Counseling Requirement - Appendix I

• New Staff Commentary for Appraisals on Higher-Priced Mortgage Loans - Appendix I

• New Staff Commentary for ARM notices; Payment Crediting & Payoff Statements; and Periodic Statements - Appendix I

• New Staff Commentary for Mortgage Loan Originator Requirements (all of them) - Appendix I

Regulation X (Real Estate Settlements Procedures Act) - 12 CFR 1024

• Changes to Escrow Accounts - 12 CFR 1024.17

• New Homeownership Counseling Disclosure - 12 CFR 1024.20

New Subpart C to 12 CFR 1024

The CFPB reorganized Regulation X - including a new Subpart C with Mortgage Servicing Requirements.  Sections 1024.30 through 1024.41 can all be found at this link.  Below are the new sections under Subpart C:

Subpart C—Mortgage Servicing

1024.30   Scope.

1024.31   Definitions.

1024.32   General disclosure requirements.

1024.33   Mortgage servicing transfers.

1024.34   Timely escrow payments and treatment of escrow account balances.

1024.35   Error resolution procedures.

1024.36   Requests for information.

1024.37   Force-placed insurance.

1024.38   General servicing policies, procedures, and requirements.

1024.39   Early intervention requirements for certain borrowers.

1024.40   Continuity of contact.

1024.41   Loss mitigation procedures.

The language of those new sections is available here.

Appendices to Regulation X

• New Model Language for Force-placed Insurance Notices - Appendix MS-3

• New Model Language for Early Intervention; Loss Mitigation; and Housing Counselor Notices - Appendix MS-4

• Official Bureau Interpretations to Reg X - Supplement I (link goes to Federal Register)

***

Wow - that is a lot of links and a long blog post.  I know I've been running down some rabbit holes in my research and I'm sure some blog readers have as well.  Hopefully this blog post helps organize the confusion.  A bit.  Have a great weekend!

NAFCU's Five-Point Plan for Credit Union Regulatory Relief

Written by Steve Van Beek

We mentioned last week, NAFCU's letter to Congressional leaders calling for regulatory relief for credit unions.

Below, I'll outline the five-point plan and why regulatory relief is needed (nevermind - no need to preach to the choir!).

I did want to share this paragraph which does a great job of explaining the issue to Congress:

"Our nation's credit unions are struggling under an ever-increasing regulatory burden that must be immediately addressed.  A survey of NAFCU members late last year found that 94% have seen their regulatory burden increase since the passage of the Dodd-Frank Act in July 2010.  The regulatory onslaught continues to compound as credit unions now have over 5,000 pages of rules from the Consumer Financial Protection Bureau (CFPB) that they must understand, interpret, and ultimately comply with - despite the fact that Congress has widely acknowledged that credit unions were not the cause of the financial crisis.  Credit unions, many of which have very small compliance departments, must comply with the same rules and regulations as our nation's largest financial institutions that employ armies of lawyers.  The impact of the ever-increasing regulatory burden is even more sobering, as the number of credit unions continues to decline.  There are nearly 700 fewer credit unions today than there were before the passage of the Dodd-Frank Act."

Read that last line again:  There are nearly 700 fewer credit unions today than there were before the passage of the Dodd-Frank Act.  

That is why NAFCU is pushing so hard for regulatory relief.

***

Five-Point Plan. NAFCU's five-point plan for credit union regulatory relief covers these five major issues (we'll discuss each in more detail in later blog posts):

• Administrative Improvements for the Powers of the NCUA

• Capital Reforms for Credit Unions

• Structural Improvements for Credit Unions

• Operational Improvements for Credit Unions

• 21st Century Data Security Standards

You can find the full letter and details here.  As indicated, we'll expand on each point in future blog posts.  

Mortgage Headache Areas; Upcoming Mortgage Reform Webcasts

Written by Steve Van Beek

Yesterday was NAFCU's first webcast as part of our Mortgage Reform Webcast Series.  I provided an overview of the seven new mortgage regulations - focusing specifically on the scope & applicability of the new requirements.  

I also provided some insight on "Headache Areas" and included this list at the end of the presentation:

• Determining Exemption Applicability

• New Notices – Content-Rich and Strict Timelines

• Error Resolution & Information Request Procedures

• Loan Originator Compensation Determinations

• Implementing So Many Changes At One Time

And, there will be many additional headaches as credit unions work toward implementing the new requirements.  Even self-induced ones.  

There is some hope on the horizon as the CFPB issued their best press release of their history which highlights their Implementation Plan for New Mortgage Rules.  The CFPB's plan indicates they are listening to NAFCU and credit union concerns regarding the overwhelming burden of reading, understanding, interpreting and implementing numerous requirements simultaneously.  Of course, we'll have more information on the CFPB's plan in future blog posts.

***

Upcoming Mortgage Reform Webcasts.  As I mentioned, yesterday's webcast was the first of our series and registration for the next three is now open.

• CFPB's Ability to Repay and Qualified Mortgage Requirements - March 6, 2013 - 2:00 p.m. to 3:30 p.m.

On March 6, Andy Keeney from Kaufman & Canoles will be examining the details of the CFPB's Ability-to-Repay Requirements and Qualified Mortgage Standards.  Andy will walk through the new underwriting guidelines - including the debt-to-income requirements - and explain how these rules will impact credit union mortgage lending.  And, importantly, the steps your credit union needs to take to comply by January 10, 2014.  

• Digging Deeper: CFPB's Mortgage Rules - March 27, 2013 - 2:00 p.m. to 3:30 p.m.

I'll be joined by my colleagues JiJi Bahhur, Bernadette Clair and Mike Coleman as we explore details of the CFPB's new mortgage requirements.  We'll provide answers to Frequently-Asked-Questions that our team has fielded from NAFCU member credit unions.  And, we'll take a look ahead at what other areas the CFPB is likely to address in 2013.  

• Which New Requirements Apply to HELOCs? - April 10, 2013 - 2:00 p.m. to 3:30 p.m.

I'll provide a detailed look at which requirements apply to home equity lines of credit and - just as importantly - which do not apply so that your credit union can best position your implementation strategy.  If your credit union makes HELOCs, this is one you'll want to attend as the new requirements are sprinkled throughout the CFPB's 3507 pages!

***

Programming Note:  NAFCU's offices will be closing early tomorrow and will be closed on Monday for the Federal holiday.  We'll have a blog post tomorrow and then start back up again on Tuesday.   

NAFCU's Scope & Applicability Charts for the New Mortgage Rules; NAFCU Calls for CU Reg Relief

Written by Steve Van Beek

The CFPB's 3507 pages of new mortgage regulations has everyone wondering where to start and how to best handle the new requirements.  One of the best first steps is to determine which requirements apply to which types of mortgage loans.  To help with this, NAFCU has put together the following Scope & Applicability Charts:

• Regulation Z (TILA) Mortgage Servicing Requirements

• Regulation X (RESPA) Mortgage Servicing Requirements

• Loan Originator Compensation, Qualifications, Training and Disclosure Requirements

• Regulation B Appraisal Requirements

• Appraisal Disclosure Requirement for Higher-Priced Mortgage Loans

• Appraisal Requirements for Higher-Priced Mortgage Loans

• New Escrow Requirements for Higher-Priced Mortgage Loans

• New Requirements for High-Cost Mortgage Loans

• New Homeownership Counseling Disclosure Requirement

• Ability-to-Repay Requirements and Qualified Mortgage Standards 

Now, you might be wondering how you gain access to those charts.  There are Five Ways:

• NAFCU members have access directly via NAFCU's CFPB Mortgage Rules webpage.

• Registrants for today's webcast on The CFPB's Final Mortgage Regulations (registration is still open) will be able to download the charts during the webcast.

• Attendees at NAFCU's Regulatory Compliance School will hear a similar presentation to today's webcast and will receive access to the charts at School in March (of course, NAFCU members can access the charts here).

• Purchasers of NAFCU's Credit Union Compliance GPS will receive access in mid-March when the 2013 GPS is available.

• Non-NAFCU member registrants of NAFCU's Regulatory Compliance Seminar will receive access in the next week.  If you sign-up for Seminar after today, we'll get the charts to you within a week of your registration.   

A Note on Sharing of Charts.  We put a ton of time and effort into researching and creating these charts.  And, we've made the accessible - in one way or another - to any credit union or organization that is interested.  Please do not share these outside of your credit union.  Of course, if you have any questions - just shoot me an email.  

Hope to see you on today's Mortgage Rules Webcast.

***

NAFCU Calls for Regulatory Relief.  Yesterday morning, NAFCU sent a letter to Senate and House leaders calling for a five-point plan on providing regulatory relief for credit unions through administrative, capital, structural, operational and data security reforms.  You can find the letter here.  For additional details, check out the NAFCU Today.

"All-in APR" Decision Delayed; HELOCs Next?

Written by Steve Van Beek

One of the biggest issues from the CFPB's mortgage proposals was their completely voluntary proposal to amend the definition of "finance charge" under the Truth in Lending Act.  Keep in mind that their proposal was not mandated by the Dodd-Frank Act.  In fact, the plain language of the existing Truth in Lending Act provides a clear definition of "finance charge" (which was not changed by Dodd-Frank).  This definition includes a clear description of which fees and charges are specifically excluded.

With that background, it was very welcome news in the final regulations to see the CFPB delay any decision on the "All-in APR" until the TILA/RESPA Integrated Disclosures are finalized (most likely this fall).  Here is from the CFPB's High-Cost Final Rule:

"The Bureau's 2012 TILA-RESPA Proposal sought comment on whether to finalize the more inclusive finance charge proposal in conjunction with the Title XIV Rulemakings or with the rest of the TILA-RESPA Proposal concerning the integration of mortgage disclosure forms.  Upon additional consideration and review of comments received, the Bureau decided to defer a decision whether to adopt the more inclusive finance charge proposal and any related adjustments to regulatory thresholds until it later finalizes the TILA-RESPA Proposal."

Good news on the delay - but the CFPB didn't provide any hint of which way they were leaning (or where they obtain the authority to override the clear language Congress adopted over 20 years ago). 

***

Consumer Group Comments.  You can bet that credit union and other financial institutions were not the only ones submitting comments on this issue.  Consumer groups have been very active and the final rule indicates they are expanding their calls for an "All-in APR" to open-end home equity lines of credit (HELOCs).  The CFPB's original "All-in APR" proposal was limited to closed-end mortgage loans.  This meant that non-mortgage closed-end loans (i.e., auto loans) and open-end loans - including HELOCs - would not have been impacted.  But, the CFPB has been getting comments on expanding this to HELOCs:

"One consumer group commenter urged the Bureau to make the APR coverage test more consistent between closed- and open-end credit by adopting a more inclusive APR calculation for HELOCs.  The commenter argued that, under the Bureau's proposal, a creditor could impose astronomical closing costs on a HELOC without meeting the APR coverage test, because such charges are not included in the APR calculation for HELOCs.  The commenter expressed concern that the difference in the APR for HELOCs versus closed-end transactions will unduly encourage creditors to steer consumers toward HELOCs, and particularly to HELOCs with excessively high closing costs.

The Bureau acknowledges that Regulation Z requires a different calculation of APR for closed-end transactions (interest rate plus other charges) than for HELOCs (interest rate only) for disclosure purposes.  Using these existing APRs for HOEPA coverage necessarily means that non-interest charges will be reflected in the APR for closed-end, but not for open-end.  The Bureau declines at this time, however, to adopt a different APR for HELOCs........Thus, the Bureau believes that comments concerning the disparity between the APR for closed- and open-end credit transactions are better considered as part of a broader reevaluation of the HELOC provisions of Regulation Z, rather than in the context of this rulemaking to implement section 1431 of the Dodd-Frank Act."

As they say, stay tuned.

Where is the Full Regulation Z (and Regulation X)?

Written by Steve Van Beek

It has been almost a month since the CFPB started finalizing their new mortgage rules.  And, credit unions still don't have a full picture of what Regulation Z and Regulation X will look like come January 2014.  

I blogged about this issue back in September 2012 - when credit unions were trying to understand the proposals and how they would impact their credit union:

"The response in the joint letter is to strongly request that the CFPB publish a complete version of Regulation Z (i.e., as the regulation would be if all the proposals were adopted):

'Finally, there are several outstanding proposed rules making changes to Regulation Z.  These proposals cross-reference provisions in each other, making it difficult to tell what each references and what Regulation Z would look like if all of these proposals are finalized.  In addition, there are conflicts among the proposals.  For example, the proposed Ability to Repay rule would remove § 1026.35 because Dodd-Frank made it obsolete, but the proposed HOEPA rule would retain it.  We respectfully request that the CFPB publish a single version of Regulation Z as it would be amended by all of the pending rulemakings as soon as possible.  This would improve our ability to provide input that CFPB will need before the comment periods close.'

I don't think it is too much to ask that the CFPB provide a complete version of the proposed Regulation Z.  Only with a complete version will credit unions be able to analyze and review the all the proposed changes together and provide substantive comments to the CFPB about how the proposals will impact their mortgage operations."  

The CFPB never did provide a full Regulation Z or Regulation X of the proposed rules.  

Now, that the rules are finalized - the CFPB needs to take steps to help credit unions understand the new regulations.  Considering there are seven inter-related new regulations, it would be extremely helpful if the CFPB put together a full Regulation Z and Regulation X - as they will look in January 2014 - so that credit unions can see the total picture rather than having to review the requirements piecemeal through each of the final rules.  Hopefully the CFPB is listening this time.

***

NAFCU Webcast on Final Rules.  The first webcast of our Mortgage Reform Series will be Wednesday, February 13 on The CFPB's Final Mortgage Regulations.  Registration is still open and, as always, you don't have to be a NAFCU member to participate.  In fact, you don't even have to be a credit union.  Our conferences and webcasts are open to everyone.

NCUA's Annual Regulatory Review; Noninterest-Bearing Transaction Accounts & 12 CFR 745.14

Written by Steve Van Beek

A couple weeks ago, NCUA announced the list of their regulations they'll review in 2013:

• 12 CFR 711  Management Official Interlocks
• 12 CFR 712  Credit Union Service Organizations
• 12 CFR 713  Fidelity Bond and Insurance Coverage for FCUs
• 12 CFR 714  Leasing
• 12 CFR 715  Supervisory Committee Audits and Verifications
• 12 CFR 716  Privacy of Consumer Financial Information
• 12 CFR 717  Fair Credit Reporting
• 12 CFR 721  Incidental Powers
• 12 CFR 722  Appraisals
• 12 CFR 723  Member Business Loans
• 12 CFR 724  Trustees and Custodians of Certain Tax-Advantaged Savings Plans
• 12 CFR 725  National Credit Union Administration Central Liquidity Facility
• 12 CFR 740  Accuracy of Advertising and Notice of Insured Status
• 12 CFR 741  Requirements for Insurance
• 12 CFR 745  Share Insurance and Appendix
• 12 CFR 747  Administrative Actions, Adjudicative Hearings, Rules of Practice and Procedure, and Investigations

The list is available here.  This regulatory review time is a great time to bring ongoing issues to NCUA and demonstrate the regulatory burden from the existing regulations and, importantly, how the existing regulatory burden needs to be reduced as there are new burdens being piled on - from multiple regulators - on a daily basis. 

***

Initial Thoughts.  Looking at the list, a couple items jumped out at me.  First, it will be interesting to see how NCUA handles 716 and 717 now that the CFPB has taken over authority for Privacy and a supermajority of FCRA.  Second, is NCUA going to look at providing additional exemptions to the "official advertising statement" - such as for use in social media?  Looks like a natural fit for 12 CFR 740.5(c)(9).  My third thought is below.

***

Noninterest-Bearing Transaction Accounts.  As of December 31st, the unlimited share insurance coverage for noninterest-bearing transaction accounts expired.  Now would be a good time to make sure you've removed any notices from your branches and your website.  Also, if you haven't already - be sure to provide impacted members with a notice (you have flexibility as discussed in this December 18th blog post).  

NCUA issued Letter to Credit Unions 12-CU-14 to help inform credit unions in advance of the expiration.  After the expiration was finalized, NAFCU talked with NCUA staff about updating Section 745.14 to remove the outdated language for noninterest-bearing transaction accounts and it looks like it is in the works.  

Challenges (Surprise!); New NAFCU Resource - Mortgage Rules Webpage

Written by Steve Van Beek

My colleague Anthony Demangone (you may remember him as "the Compliance Guy") put together a great blog post a few weeks back based on input from his blog readers.  The blog post is here.  

The first question was: What are the biggest challenges facing credit unions in a negative way?  The answer:

The second question: What are the biggest challenges facing credit union leaders on a personal level?  The answer:

And, that was before the mortgage regulations were finalized.  And it was mostly managers/executives responding - imagine the response from compliance officers!  Here is to hoping the regulators (and, just as important, Congress) are listening.  

Note:  You can subscribe to the Musings from the CU Suite blog emails here.

***

New Mortgage Rule Webpage.  We are very excited about our new webpage to help organize compliance resources related to the CFPB's new mortgage regulations.  Be sure to check it out!  And, this page will be evolving as we add new resources.  

For example, we'll be adding articles from future Compliance Monitors - for now, check out the February article on Escrow Requirements for Higher-Priced Mortgage Loans (NAFCU members-only).

Of course, if you have feedback - please let us know!

CFPB Issues New Credit Card Requirement for Certain CUs - Only Gives 10 Business Days to Comply

Written by Steve Van Beek

Hopefully that headline got your attention!  Unfortunately, this seems to be a real requirement for certain credit unions and it shows how out of touch the Consumer Financial Protection Bureau (CFPB) is with how credit unions operate.  It also shows how the CFPB says one thing - we understand the regulatory burden on credit unions - but then does another.

The Surprise from the CFPB.  On Wednesday evening (January 30th), the CFPB sent an email to 160 credit card issuers requesting information for their credit card survey under Section 136 of the Truth in Lending Act (which was added by the Fair Credit and Charge Card Disclosure Act of 1988).  The email indicated that responses needed to be returned 10 business days after January 31, 2013 (no firm date was included - institutions will have to count for themselves). 

Where do Credit Unions Fit In?  The CFPB took over responsibilities for Section 136 of TILA after the transfer of authority in July 21, 2011.  Historically, this credit card survey was performed by the Federal Reserve and credit unions were not part of the survey.  This all changed on Wednesday evening, when the CFPB sent the email to the 160 credit card issuers - including approximately 20 credit unions (the CFPB has not provided the list of the 160 institutions).    

The CFPB's Confusing Language.  The CFPB's email did not make clear that responding to the survey - for those lucky card issuers - was a legal requirement.  The CFPB stated: "Your institution was selected to participate a [sic] semiannual survey on the terms of credit card plans as mandated by the Fair Credit and Charge Card Disclosure Act of 1988."  Ok, we have the terms "selected" and "mandated."  That naturally causes confusion.  Credit unions aren't used to having regulatory requirements apply on a "selective" basis.  So, it would make sense to go to the link included in the email, right?

The credit card survey information is on the right hand side of the page - including this language:

"Survey of credit card plans

The CFPB began to survey semi-annually the terms of credit card plans (FR 2572) offered by financial institutions on January 31, 2012, and publishes a report of the findings. The report includes information from the largest credit card issuers in the country, as well as other financial institutions that wish to participate in the survey."

Read that line again - "other financial institutions that wish to participate in the survey."   Seems like a voluntary issue, right?  That clears up the "selected" versus "mandated" issue, doesn't it?  

Well, a good compliance officer is sure to check additional sources - such as the Form 2572 - which the CFPB hyperlinks.  That page includes this information:

"Background: The Fair Credit and Charge Card Disclosure Act of 1988 required the Federal Reserve Board to develop a credit card survey. The Board published the first report in March 1990, outlining credit card plans available on January 31, 1990.

Respondent Panel: The panel consists of the 25 largest issuers of bank credit cards and 125 additional institutions, based upon the outstanding amount of revolving credit reported on the Call Report. Respondents include commercial banks, savings and loans, savings banks, and finance companies that issue credit cards through a bank or thrift. Participation is required of the 25 largest issuers; other financial institutions participate voluntarily."  (emphasis added).

Case closed - right?  There can't possibly be more.  This is so clear - on its face - that this is an optional, voluntary, selective survey, right?  

Wrong. Wrong. Wrong.  The language of Section 136 of TILA includes:

"§ 136.  Dissemination of annual percentage rates; implementation, etc.

(a)  ANNUAL PERCENTAGE RATES.--The Bureau shall collect, publish, and disseminate to the public, on a demonstration basis in a number of standard metropolitan statistical areas to be determined by the Bureau, the annual percentage rates charged for representative types of nonsale credit by creditors in such areas. For the purpose of this section, the Bureau is authorized to require creditors in such areas to furnish information necessary for the Bureau to collect, publish, and disseminate such information.

(b)  CREDIT CARD PRICE AND AVAILABILITY INFORMATION.--

(1)  COLLECTION REQUIRED.--The Bureau shall collect, on a semiannual basis, credit card price and availability information, including the information required to be disclosed under section 127(c) of this chapter, from a broad sample of financial institutions which offer credit card services.

(2)  SAMPLE REQUIREMENTS.--The broad sample of financial institutions required under paragraph (1) shall include--

(A)  the 25 largest issuers of credit cards; and

(B)  not less than 125 additional financial institutions selected by the Bureau in a manner that ensures--

(i)  an equitable geographical distribution within the sample; and

(ii)  the representation of a wide spectrum of institutions within the sample.

(3)  REPORT OF INFORMATION FROM SAMPLE.--Each financial institution in the broad sample established pursuant to paragraph (2) shall report the information to the Bureau in accordance with such regulations or orders as the Bureau may prescribe.

...."

Notice the highlighted text in Section 136 of TILA.  I'm not an English major but I'm pretty sure "shall" and "required" are not synonyms for "wish to participate" and "voluntary."  Shame on the CFPB.

Voluntary or Required?  The statutory language and NAFCU's discussion with CFPB staff point toward a requirement, but the clear language on both the CFPB and the Federal Reserve websites indicate this is voluntary for all but the largest 25 credit card issuers.  Chalk another one up to regulatory uncertainty.

The End Result.  Those 20+ credit unions who received the CFPB's credit card survey have 10 business days after January 31, 2013 to respond to the survey.  Ultimately, the uncertainty regarding the required/voluntary nature of the way the CFPB communicated this issue means that credit unions receiving the survey will need to make a business decision regarding how to proceed (including, perhaps, calling the CFPB for additional clarification). 

Those lucky credit unions who did not receive the survey (by the way, what if the point person the CFPB sent the survey to was on a 2-week vacation, or mandatory leave, or just left the CU?) would not be required to submit the survey.  But, this should be a wake-up call to all credit unions that the CFPB may be talking the talk when it comes to regulatory burden - but it is more important that they walk the walk.   

What Should the CFPB have Done?  The rationale behind including credit unions in the survey is not the issue.  It probably makes sense to include credit union card issuers in the survey to get a better sense of the overall credit card market.  But, 10 business days to comply - come on!  A much more appropriate roll-out of this survey requirement would have been to send the survey to the 20+ credit unions and inform them that their participation in this first survey (due 10 business days after January 31st) was truly voluntary to help them get familiar with the process. After that, the CFPB could include those credit unions in the required portion of the survey in the future.  But, right off the bat - out of the blue - a new regulatory requirement with 10 business days to comply.  That is simply shocking in this regulatory environment and it speaks to a lack of coordination and communication inside the CFPB.  

As an alternative - the CFPB could have (but didn't) provide a "30-day notice" to these selected credit unions letting them know they would be included in the upcoming survey and to contact the CFPB if they had any questions on the process.  

But, the CFPB didn't take that approach.  Instead, the CFPB seems to have imposed a new regulatory requirement on 20+ credit unions with only 10 business days to comply.  I'm at a loss of words (not really, as I wrote about 1300 words on the issue) - but you get my point.  

***

Note:  The above is a separate requirement from the Credit Card Agreement Submission required by 12 CFR 1026.58 of Regulation Z - which we blogged on January 22nd.  

We've also heard from many credit unions that the CFPB has been unresponsive to their efforts to submit their credit card agreements by yesterday's deadline.  At this point, the CFPB still hasn't provided clear instructions for the process and the best course of action is to document, document, document your efforts to comply.  If the CFPB isn't responsive and you can show a good faith effort to comply, you'd have a pretty good argument against an auditor or examiner.  

***

Also, I included this blog post under the blog's UDAP category as the CFPB's action here is pretty unfair.  

CFPB's Project Catalyst & Trial Disclosure Programs

Written by Steve Van Beek

Project Catalyst. The CFPB established Project Catalyst in order to foster "consumer-friendly innovation and entrepreneurship in markets for consumer financial products and services."  There is quite a bit of information on Project Catalyst here.

Unfortunately, there is a serious design flaw.  And, that is the existing regulations and the non-stop changes to them.  Credit unions and other providers of financial products and services are spending ever-increasing time and money keeping their existing products compliant that there is little or no time for innovation or entrepreneurship.  While Project Catalyst may end up being an avenue where innovators can work with the CFPB to have their products, services or approaches deemed compliant with the CFPB's interpretation of the regulations, I seriously doubt it will have a large impact for credit unions who are trying to weave through the complex maze of regulations to fill the demands of their members.  

***

Trial Disclosure Program.  As part of Project Catalyst, the CFPB is allowing companies to run trial disclosure programs.  You can find the CFPB's press release of the this program here and their proposed policy here (NAFCU has a Regulatory Alert (13-EA-03) with additional details).     

In short, credit unions could design and test new disclosure documents - provided they receive approval up front from the CFPB.  The CFPB would give credit unions a safe harbor for compliance with the existing regulations as they test their new forms for consumer understanding, cost effectiveness and minimizing consumer harm.

Is your credit union likely to invest in a trial disclosure program?  Probably not.  There would be huge upfront costs to design a new disclosure and then you'd need to receive the CFPB's blessing.  Then, test the disclosures and share the results with the CFPB.  Hopefully, your new disclosures would help improve the existing requirements - but there would be no guarantee the CFPB would listen.

As mentioned above, credit unions are spending huge amounts of time and resources to comply with the existing regulations.  Developing their own disclosures isn't exactly on the top of the list.  

So, why I'm I spilling ink over this?  To demonstrate how backward the CFPB has the process.  The CFPB is the only entity with authority over the consumer regulations.  They also have a mandate to protect consumers and improve consumer understanding of disclosures.  So, they should be the ones creating multiple disclosure options and testing them with actual consumers in real-world situations.  Their Know Before You Owe program was similar but it included a shockingly low number of tests with consumers.  And, even worse, it hasn't been tested on any actual mortgage loans.  

If anyone is going to be creating numerous approaches to disclosures, it should be the CFPB.  And, they should partner with entities offering financial products and services to provide a safe harbor for using the CFPB's testing forms with real customers/members and the CFPB will get real feedback.

Example - Remittances.  If the CFPB had taken this approach with their remittance transfer regulation, they would have realized very early on that their approach to the regulation was going to be a huge headache for institutions who utilized an open network.  And, they would have been able to determine which disclosures were meaningful to consumers and which weren't.  That would have resulted in a better regulation in the end.  Instead, we've been through numerous ups and downs as the CFPB tries to adjust and amend a rule that was not initially designed with the real world in mind.

NAFCU's Fred Becker to Retire; ADA Lawsuits; NCUA-CFPB Town Hall Webinar

Written by Steve Van Beek

NAFCU’s Fred Becker to Retire July 31^st.  NAFCU’s President and CEO Fred Becker recently announced his decision to retire after 13 very successful years leading NAFCU.  Becker will be replaced by Dan Berger who has led NAFCU’s Government Affairs department – including NAFCU’s Compliance team – since 2006.  The motto at NAFCU is “business as usual.”  Looking at the transition through the compliance lens, we’re excited because, like Fred before him, Dan has detailed experience with the compliance issues facing credit unions (as does NAFCU’s Chief Operating Officer Anthony Demangone).  To see more about Fred Becker’s retirement and his future plans, check out this interview with CU Broadcast.  

***

ADA Lawsuits.  There has been an uptick in new ATM lawsuits – this time alleging noncompliance with the Americans with Disabilities Act.  The new speech output requirements became effective in March 2012 and the lawsuits started soon after.  Now is a very good time to audit and document your compliance with the new ADA requirements.  Past blog posts on the ADA can be found here.   

***

NCUA-CFPB Town Hall.  On Tuesday, February 5^th, NCUA Chairman Debbie Matz and CFPB Director Richard Cordray will be on a free Town Hall webinar.  The webinar starts at 3:00 p.m. on February 5^th and registration is open.  You can also submit questions in advance by using this link.    

Potential Credit Card Surcharges; Legal Hurdles in 2013; NAFCU Member Call-In; Save $100 on NAFCU Conferences; NCCO Exam Info

Written by Steve Van Beek

I'm sure everyone has plenty of reading to do with the mortgage regulations (I sure do!), so here are a few small items that should be on your radar.

Potential Credit Card Surcharges.  As part of a recent settlement, merchants gained the ability to surcharge for credit card purchases on January 27, 2013.  While this won’t directly impact your credit union, it has the potential to impact your members.  It is unknown how prevalent merchant credit card surcharging will be, but it might be a good idea to put an article in your credit union newsletter or some information on your website.  For more information, visit VISA’s website – which includes a list of state laws that still prohibit surcharges.  

***

Legal Hurdles in 2013.  The Credit Union Times ran a great article from Andy Keeney of Kaufman & Canoles on Legal Hurdles Facing Credit Unions in 2013.  Be sure to take a look and pass along to your colleagues.

***

NAFCU Members:  Don’t miss NAFCU’s first Member Call-In of 2013 – February 12 at 3:30 p.m. EST.  NAFCU’s President and CEO Fred Becker and NAFCU’s Government Affairs team will provide updates on the legislative, regulatory and compliance landscapes.  The call is free, but you must register.  New to 2013: You can submit questions in advance using the form here.  Of course, if you have a specific compliance question you can always email NAFCU’s Compliance team directly.   

***

Extra Savings for School & Seminar end on Thursday.  NAFCU is offering $100 off any conference through Thursday, January 31st.  This includes NAFCU's Regulatory Compliance School (March 18-23 at National Harbor, MD) and NAFCU's Regulatory Compliance Seminar (October 22-25 in Nashville, TN).  

Use the promo code NEWYEAR when your register to get the $100 off. 

***

School & NCCO Exams.  For those of you registered for School (or considering it), we've put together some FAQs on the process for taking the NAFCU Certified Compliance Officer (NCCO) exams.  We'll also have a NCCO Exam orientation on Sunday, March 17th (optional) as well as quick NCCO Study Sessions at the end of each day to help you keen in on which issues to study for the Exams.  

CFPB's Authority Without a Director - Redux

Written by Steve Van Beek

A ruling by the U.S. Court of Appeals for the District of Columbia (WashingtonPost.com) on the recess appointments of 3 National Labor Relations Board (NLRB) appointments caused quite a stir on Friday afternoon.  Especially, considering CFPB Director Richard Cordray was appointed at the same time.

You are probably going to read quite a bit in the upcoming weeks (and months) about what this means for Cordray's appointment and - more importantly - the CFPB's recently released final mortgage regulations (and, the remittance transfer regulation).  For credit unions, I want to point you back to one of my blog posts from June 2011 on the CFPB's Authority Without a Director.  In that post, I looked at what the CFPB could do if it did not have a "Senate-confirmed director:"

Even without a Director, the CFPB can (among other powers):

• Write rules, orders and guidance regarding any of the consumer laws that transfer to the CFPB.  This includes proposing new regulations as well as finalizing regulations (both its own and proposals it inherits from other agencies);

• Conduct examinations of and issue and enforce orders against banks, savings associations or credit unions with assets of greater than $10 billion; and

• Take over consumer protection issues related to RESPA and certain consumer rules previously under the authority of the Federal Trade Commission. 

That post relied on a January 11, 2011 joint letter from the Inspector Generals of the Federal Reserve and Treasury Department - especially Question & Answer #5.  

***

So, What Should Credit Unions Do?  Continue working on understanding and complying with the CFPB's regulations.  The CFPB had authority to issue regulations under Regulation Z (TILA), Regulation X (RESPA) and Regulation E (EFTA - remittance transfers) even without the Senate-confirmed Director.  Thus, if Cordray's recess appointment were overturned - the new requirements would still be mandatory.  Now, there would likely be numerous nuances and intricacies that would pop up - but the best course of attack is to continue to work toward understanding and complying with the CFPB's regulations.  

***

Ironically, nonbank mortgage originators and servicers would be in a slightly different boat (as would nondepository providers of remittance transfers) as the CFPB wouldn't have authority over those entities without a proper Director.  Of course, that isn't to say they would get off scot-free (in fact, it could turn out worse) - but it is a different analysis than for banks and credit unions who were already regulated at the federal level. 

***

Now is also a good time to remind readers of this blog's legal disclaimer:

LEGAL DISCLAIMER

This website is intended to provide general compliance information in regard to the subject(s) covered. It is provided with the intent and understanding that the publisher is not engaged in the act of rendering legal, accounting or any other professional advice. The information provided in this website is not intended nor should be used as a substitute for legal advice or other expert opinions and services in specific situations. NAFCU is not responsible for the content of comments and reserves the right to delete or block comments that it finds inappropriate.

Ah, that feels better.  Have a great week everyone!

Resources for the CFPB's International Remittances Regulation

Written by Steve Van Beek

A Wild Ride.  The evolution of the CFPB's international remittances regulation has been confusing to everyone.  First, we had the rule proposed by the Federal Reserve.  Then, the CFPB took over on July 21, 2011.  The CFPB finalized the rule but also proposed amendments to the rule at the same time.  Then, realizing the rule was not workable, the CFPB issued a delay of the effective date while it proposed additional changes.  So, that is where we are - trying to figure out where we are at.  And, how your credit union will be able to comply.  The CFPB has indicated the new effective date will likely be 90 days after they finalize the latest proposed changes (although they are taking comments).  That doesn't leave much time if your CU has made a business decision to continue offering remittance transfers to your members.

Below are a variety of resources that may be helpful to understand the new requirements and what steps your credit union will need to take to comply.

• The CFPB's Main Remittance Regulation Webpage

• Small Entity Compliance Guide

• Safe Harbor Countries List

• The CFPB's October 2012 Webinar on the Remittances Rule (also available here)

• Presentation Slides from October 2012 Webinar

• CFPB Bulletin 2012-08 Announcing Delay of Implementation Date

• Proposal to Amend Certain Provisions of Remittance Rule (but not the 100 transaction safe harbor level)

NAFCU also has these resources available to NAFCU-member credit unions:

• Regulatory Alert on Latest Remittance Proposal (13-EA-01) - Covers the Latest Proposed Changes

• Final Regulation on Remittance Requirements (12-EF-10) - Covers the Rules after the Concurrent Proposal was Finalized

• Final Regulation on Remittance Requirements (12-EF-02) - Covers the First Remittance Regulation Finalized by the CFPB

Throughout the process NAFCU has sent numerous comment letters to the CFPB on the remittance requirements.  Recently, we sent a letter urging the CFPB to further delay the requirements to ensure the rules do not unnecessarily burden credit unions trying to comply:

“First, NAFCU requests that the CFPB further extend the 90-day delay of the effective date to allow credit unions sufficient time to comply with the proposed rule and to make the required disclosures of fees, taxes, and exchange rates. Second, NAFCU continues to believe that the CFPB should exempt federally regulated credit unions, or, alternatively, small entities consistent with the Small Business Regulatory Enforcement Fairness Act, from the purview of the final remittance transfer rule. The regulatory burden that the remittance transfer rule places on credit unions will lead to a significant reduction in consumers’ access to remittance transfer services. Many credit unions already facing an enormous compliance burden have or will be forced to discontinue their remittance programs, and those that continue to offer remittances will be forced to significantly increase their members' fees.  

Further, NAFCU would like to reiterate the necessity for the CFPB to respond to credit union concerns during the rulemaking process, rather than implementing remedial measures after the fact. Although NAFCU appreciates the CFPB’s responsiveness to reconsider the remittance rule, proactive efforts by the CFPB to address potential problems and reduce the future compliance costs and regulatory difficulties faced by credit unions would be far more effective when conducted prior to and during the rulemaking process.”  (Emphasis added).

The last paragraph is especially important.  The process this regulation has taken has left everyone's head spinning.  The CFPB had opportunities to listen to industry feedback and make changes upfront.  Instead, they finalized the rules and only then did they realize they were not workable.  Unfortunately, the lack of operational experience and background at the CFPB was on full display.  They had a rule and were going to finalize it no matter what the consequences.  

***

NAFCU Remittances Webcast Today.  We also have a webcast on the Remittances Webcast today at 2:00 p.m. EST.  Be sure to tune in.  We've extended the early-bird deadline indefinitely, so you can purchase the webcast at any time (including after today) at the early-bird price.  To learn more about the webcast, click here.  

Effective Dates for New Mortgage Regulations: The CFPB and "Issue Dates"

Written by Steve Van Beek

With all the new regulations, I thought it would be useful to list the effective date of each new regulation along with a link to the corresponding regulation page on the CFPB's website.

• June 1, 2013 - Escrow Requirements for Higher-Priced Mortgage Loans

• June 1, 2013 - Prohibition on Mandatory Arbitration and Financing of Credit Insurance Premiums (from MLO Compensation Regulation)

• January 10, 2014 - Qualified Mortgage and Ability-to-Repay Requirements

• January 10, 2014 - Mortgage Servicing Requirements - Reg Z (TILA) and Reg X (RESPA)

• January 10, 2014 - Loan Originator Compensation and Training, Certification and Identifier Disclosure

• January 10, 2014 - High-Cost/HOEPA Mortgage Loans and Homeownership Counseling Disclosures

• January 18, 2014  - Disclosure and Delivery of Free Copies of Appraisals - Regulation B

• January 18, 2014 - Appraisals for Higher-Priced Mortgage Loans

***

CFPB and "Issue Date."  The CFPB likes to make up its own rules.  Including their recent announcement that their rules are considered "issued" when they are posted on the CFPB's website rather than the normal Administrative Procedure Act timeframe of when the rules are published in the Federal Register.  

Well, as chance would have it, the CFPB's mortgage rules are slated for publication in the Federal Register for the following dates:

• January 22nd for Escrow Final Rule (link goes to actual Federal Register document)

• January 30th for Qualified Mortgage/Ability-to-Repay Final Rule (link goes to Public Inspection Desk)

• January 30th for High-Cost/HOEPA and Homeownership Counseling Disclosures (link goes to Public Inspection Desk)

The other regulations will be in the Federal Register at an even later date.  

Why does this matter?  The CFPB gave 12 months (and sometimes less) from the "issue date" to implement the majority of the new requirements.  Because the CFPB considers the "issue date" as the date of publication on the CFPB's website - rather than publication in the Federal Register - your credit union will have less time to comply with the final rules.  

Summary.  If the CFPB would have followed the normal Administrative Procedures Act process, your credit union would have 12 months - from the date of publication in the Federal Register - to comply.  

Unfortunately, Dodd-Frank gave the CFPB very strict deadlines for issuing their final regulations and the CFPB chose to alter long-standing rulemaking practices instead of using its exemption authority (like it did for other Dodd-Frank requirements) to ease the impact of these regulations.    

IRS Issues - Box 4 of 1098 & Truncated TINs Proposal; Credit Card Agreements to CFPB

Written by Steve Van Beek

Whenever I get a chance to talk to regulators directly, I make a point of explaining to them that credit unions are not able to focus solely on their regulations, even if they wanted to.  This morning's blog post is an example of that.  We've all been trying to keep up with the CFPB's final mortgage regulations, but there are plenty of other issues out there to stay on top of.  Plenty.  

***

MLO Compensation (and more) Final Rule.  Oh, and by the way, the CFPB's MLO compensation rule is finally out.  Cordray's remarks are here, the press release here, the summary is here, special regulation page here and the full rule is available here (541 pages).

Effective Date:  The majority of the rule is effective on January 10, 2014.  However, the prohibitions on mandatory arbitration and financing of credit insurance premiums are effective June 1, 2013.

*** 

Now, on to a few other items.

Mortgage Insurance Premiums & 1098s.  Throughout 2012, it was known that mortgage insurance premiums would not be deductible for tax year 2012.  But then the fiscal cliff legislation happened, and mortgage insurance premiums were made retroactively tax deductible and credit unions (and their vendors) scrambled to correct Box 4 of their 1098s.  The IRS issued Internal Revenue Bulletin 2013-3 which indicates that Box 4 - for mortgage insurance premiums - has been reinstated.  Additional information is available in the NAFCU Today.

IRS Proposal for Truncated TINs.  The IRS has been operating a pilot program since 2009 that allows certain filers to truncate Social Security Numbers and TINs on IRS information returns (more on the pilot program is available here).  On January 7th, the IRS proposed a regulation that would allow filers of certain information returns - including credit unions - to use a "truncated taxpayer identification number" (TTIN).  While this is only a proposal at this time, the feedback from the prior pilot program was overwhelming positive and it is likely that credit unions will have the option to use TTINs for next year's IRS information returns.  

Note: The proposal would not require credit unions to use TTINs.  But, you'd have the option.  

I wish other regulators took this approach.  In this situation, the IRS had been getting feedback from filers, consumers and organizations that TTINs would help protect nonpersonal public information and, potentially, reduce identity theft.  Not only did they listen to concerns, but they also proposed a rule that would make this change optional which would allow credit unions to make the transition when the time is right for their credit union (and their vendor).  

***

Credit Card Agreements Due January 31st.  Speaking of other regulators, credit card agreements are due to the CFPB by January 31st.  The underlying requirement comes from 12 CFR 1026.58(c).  These agreements need to be sent quarterly:  January 31st, April 30th, July 31st and October 31st.  I'd put those dates on your calendar if your credit union has over 10,000 credit card accounts.  For those under 10,000 credit card accounts, Section 1026.58(c)(5) includes a de minimus exception and you wouldn't need to send your agreements to the CFPB (there are still other requirements in 12 CFR 1026.58 that do apply).

The CFPB's Credit Card Agreement database is available here.  

Improvements Needed.  I'll note that the CFPB hasn't exactly made this quarterly submission process easy.  There isn't any information on their website regarding the process.  The emails the CFPB sends to institutions are sometimes late and the information is usually only sent to one person at the credit union (what happens if they left, are on extended leave or just on vacation?)  And, what happens when a credit union reaches the 10,000 threshold?  How do they learn the CFPB's process?  How do they get on the super secret "update your credit card agreement" email list?  

These are all issues that NAFCU has raised with the CFPB.  Hopefully we'll see changes in their process in the future to make it more transparent and easy to follow.  With all the other issues going on, this is one the CFPB should streamline to reduce the burden and confusion for card issuers.    

One Improvement:  One thing we have heard is that you should be able to include additional employees onto the CFPB's emails regarding the card agreement submissions.  Send them an email request asking them to add the additional email(s) whenever they send your credit union information on your credit card agreements.   

Reg B Appraisal Final Out; CFPB Summary of Higher-Risk Appraisals; More on Mortgage Servicing Rules

Written by Steve Van Beek

A couple of additional items before the weekend.  Reminder: NAFCU's offices will be closing early today and will be closed until Tuesday.  

Regulation B Appraisal Finalized.  The CFPB released their final rule for free copies of appraisals under Regulation B.  The press release is here.  There is a consumer summary as well as a detailed summary.    

The special page for the Regulation B final rule is located here.   

Effective Date:  January 18, 2014.  

***

Appraisals for Higher-Risk Mortgages.  As expected, the CFPB issued their own information regarding the interagency final rule on appraisals for higher-risk mortgages.  Their press release is here.  They also released a consumer summary as well as a detailed summary.  Effective Date: January 18, 2014.    

The special page for the Appraisals for Higher-Priced Mortgages* is located here.

*Note: The final rule adopts the term "higher-priced" for these loans to help align the rule with the existing "higher-priced" mortgage loan requirements (including escrows).  

NCUA also issued a press release and a link to the final rule on their website.  

So where will credit unions need to look for this requirement?  NCUA's rule or the CFPB's?

Here is from the final rule:

"The NCUA and FHFA adopt the rules as published in the Bureau’s Regulation Z at 12 CFR 1026.35(a) and (c), by cross-referencing these rules in 12 CFR 722.3 and 12 CFR Part 1222, respectively."

Thus, after the rules are in the Electronic Code of Federal Regulations, credit unions will need to use 12 CFR 1026 - Regulation Z - as NCUA's rule will simply tell them to go find the requirements in 12 CFR 1026.35. 

Just for fun, here is the wonderful legalese that will be located in 12 CFR 722.3(f):

"(f)  Higher-priced mortgage loans.  A credit union may not extend credit to a consumer in the form of a “higher-priced mortgage loan” as defined in 12 CFR 1026.35(a)(1), without meeting the requirements of section 129H of the Truth in Lending Act, 15 U.S.C. 1639h, and its implementing regulations in Regulation Z, 12 CFR 1026.35(c)."

Say that five times fast.  

***

More on Mortgage Servicing.  There has been quite a bit of discussion in the news about the 5000 transaction exemption for mortgage servicing.  Unfortunately, some of it has the potential to cause confusion.  When you are reading news stories or summaries of the mortgage servicing rule, remember that the 5000 transaction exemption does not cover all the new requirements.  For example, the requirements for error resolution and information requests procedures will apply to all credit unions performing mortgage servicing.  And, it looks like the force-placed insurance requirements will apply as well.  

"The Bureau agrees that additional exemptions are appropriate for certain of the rulemakings.  As discussed in more detail below, the Bureau has determined not to implement these additional exemptions to those regulations that principally implement requirements set forth in the Dodd-Frank Act.  These include the requirements in §§ 1024.35 (Error Resolution Procedures), 1024.36 (Information Requests), and 1024.37 (Force-Placed Insurance).  With respect to error resolution procedures and information requests, those provisions build upon the existing Qualified Written Request procedures, which are currently applicable to the servicers discussed above.  Providing an exemption to these requirements would have removed a currently existing consumer protection."  Page 90-91 of the Reg X/RESPA Mortgage Servicing Final Rule.

There could be more.  For now, if a colleague starts celebrating that you are under 5000 transactions and not subject to the mortgage servicing rule - just remind them of these six words that compliance officers know too well: "the devil is in the details."

Note: NAFCU's Mortgage Reform Webcast Series will feature a May 15 webcast on the error resolution and information request requirements.  

What is a Transaction?  We'll have more on this in a future blog post, but the periodic statement requirement covers all closed-end loans secured by a dwelling.  This would include closed-end home equity loans.  Open-end loans (i.e., HELOCs) are excluded.  Again, expect additional information next week on this issue (I have a weekend reading date with the devil to discuss the details).  

***

Final Rule for Mortgage Loan Originator Compensation?  I haven't seen it yet, but it is likely to come out today as well.  

The best place to check is the CFPB's main regulation page.  We'll also post the information on this blog post (yes, the one you are reading) after it is out.  Just click this link and you'll go to the compliance blog itself and will be able to see any updates.

Update at 4:30 p.m. on 01/18/2013.  Cordray's remarks on mortgage loan originator compensation are here.  Our NAFCU Today story is here.  Additional information on the rule - including the full regulatory text - is not expected until Sunday.    

Update at 6:45 a.m. on 01/19/2013.  The CFPB's press release is available as is their summary of the rule.  The full rule will come out Sunday, January 20th.  

Update at 2:00 p.m. on 01/20/2013.  The CFPB's special regulation page for the MLO rule is here.  The full MLO compensation rule is available here (541 pages).

Effective Date:  The press release indicates the effective date for the majority of the new requirements will also be January 10, 2014.  However, two provisions - prohibition on mandatory arbitration and the prohibition on financing credit insurance - will be effective June 1, 2013.

Have a great weekend!

CFPB Field Hearing - Atlanta; Mortgage Servicing Final Rule; Appraisals for Higher-Risk Mortgages Final; NAFCU Final Regulation on Qualified Mortgages

Written by Steve Van Beek

CFPB Field Hearing.  Today, we should get a look at the CFPB's next final rules for the mortgage market.  We are expecting the final rules for mortgage servicing (both Reg Z and Reg X), mortgage loan originator compensation (and much more), and possibly the Reg B final rule for appraisal disclosures.  

***Updated at 8:00 a.m.***

Mortgage Servicing Final Rule.  As expected, the mortgage servicing rules will be the main focal point of the CFPB's field hearing today.  The rules should be online later today (when it is, it will be posted here).  

As of 8:15 a.m., there is a short summary and a fact sheet.  

***At 9:30 a.m., the CFPB posted their press release, Director Cordray's speech and a webpage with the final rules (the Reg X/REPSA rule is 753 pages and the Reg Z/TILA rule is 426 pages).*** 

Effective Date:  The summary indicates January 10, 2014 as the effective date (in other words, the CFPB is providing less than 12 months for this rule).  

Small Servicer Exemptions:  I also noticed this paragraph in the fact sheet:

"SMALL SERVICER EXEMPTIONS

Recognizing that small servicers approach servicing quite differently, the CFPB has made certain exemptions to today’s mortgage servicing rules. Servicers that service 5,000 mortgage loans or less and only service mortgage loans that they or an affiliate own or originated are exempt from some of the new rules. These exemptions include many of the procedural rules, including most of the requirements regarding the handling of loss mitigation applications."

We'll have additional details on exactly which mortgages are included in this 5000 in a future blog post.  For now, check how many mortgages you currently service and you'll get a good initial look at how onerous the mortgage servicing rules will be for your CU.  

***  

Appraisals for Higher-Risk Mortgages.  On Tuesday, the FDIC posted an approved version of the joint final rule on appraisals for higher-risk mortgages.  There are additional details in the NAFCU Today.  Both the CFPB and NCUA were joint on this rulemaking, so expect the CFPB to have additional details on this final rule in the near future (most likely a press release and short summary - and, hopefully, a Fact Sheet for compliance officers).  

***

NAFCU Final Regulation on Qualified Mortgages.  NAFCU's Regulatory Affairs team has finished their summary of the Qualified Mortgage/Ability-to-Repay final rule.  NAFCU members can find it here (13-EF-01).  

They are also working on summaries of the escrow final rule, HOEPA/high-cost final rule and the concurrent proposal for the qualified mortgage rule.  When they are available, NAFCU members can find the Final Regulations here and the Regulatory Alert here.  

Reminder: You can find information on the first three final rules in this blog post.  NAFCU also has a Mortgage Reform Webcast Series planned for 2013 and we'll also have a special Regulatory Update day - including sessions on the new moretgage regulations - on the Thursday of Regulatory Compliance School.  P.S. Register for School by January 31st using the promo code NEWYEAR to save $100.  

NCUA Exam Focus for 2013; NCUA/CFPB Webinar on Feb 5th

Written by Steve Van Beek

Yesterday, I mentioned the January issue of the NCUA Report.  Today, I wanted to highlight a few items from the Exam Focus article (starts on Page 1 and continued on Page 5).

The article indicates that NCUA's objective in the 2013 examination process is "to improve the capacity of credit unions and of NCUA itself, while providing better clarity and consistency for both examiners and credit union staff."

The three c's are then explained in more detail.

Capacity.  The article discusses both capacity of NCUA - with regard to their resource allocation and adjustments to their examination offices.  The capacity of credit unions will examine:

• Adoption of New Technology - Examiners will review how well credit unions put risk management controls in place when expanding the use of technology, such as online banking and social media.
• Balance Sheet Management - Examiners will explore whether credit unions are appropriately managing earnings and capital without adding undue levels of interest rate, liquidity and credit risk.
• Operational Risk - Examiners will look into how capable are credit unions to control operational risk and maintain a sound system of internal controls.
• Other Assets - Examiners will review whether credit unions are actively managing the unique risks associated with unconventional products, such as investments in credit union-funded benefit plans or private student loan programs.

Clarity & Consistency (my two favorite c's).  NCUA is working on improving by:

• Expanded Use of Guidance - NCUA will continue to use supervisory letters to clarify regulatory requirements and provide clear supervision expectations.  For 2013, examples include forthcoming guidance on: member business loan waivers and personal guarantees, loan workouts/troubled debt restructured loans, and the use of credit ratings. (emphasis added).
• Examination Program Enhancements - NCUA is developing better training and guidance in several areas, such as the development and use of Documents of Resolution.  The pre-exam letter is also being modified to communicate additional information about the examination process.  Additionally, the exam report cover letter is being enhanced to better describe all examination appeal options - both formal and informal - available to credit unions. (emphasis added).

The article also mentions the National Supervision Policy Manual - which NAFCU continually requested - and how this manual should help improve consistency throughout regions.

NCUA will also follow-up with a Letter to Credit Unions highlighting their Exam Focus for 2013.  You can see their focus for 2012 here. 

***

NAFCU Letter.  NAFCU's letter to NCUA on their budget - which we mentioned yesterday last week - also included this on exams:

"NAFCU also encourages the agency to pull back on its increased spending related to examinations.   The NCUA has made no secret of the fact that it has invested heavily on examinations in recent years.  However, as the agency has emphasized in recent months, the state of the industry has improved steadily over the past year and fewer credit unions pose safety and soundness concerns.  Despite this fact, however, the 2013 budget does not decrease expenses related to examinations in proportion to the improvements the agency has seen.  Rather than reducing the agency’s costs associated with examinations, the agency is currently reallocating resources as it opens its new Office of National Examinations and Supervision.

Further, our members continue to find that examinations are far too onerous and costly, and that regulations continue to be inconsistently applied.  Specifically, we continue to hear from our members that examiners are still misusing examination tools, such as Document of Resolutions (DORs), in situations where an examiner’s findings are more appropriate.  NAFCU strongly believes that NCUA examiners should only use DORs and similar formal actions in limited and prescribed circumstances.  Further, examinations should not be a “gotcha” exercise; credit unions should reasonably expect the results from an examination based on the process. Simply put, as the NCUA and other regulators pile on the regulations, it is crucial that NCUA find ways to make examinations less burdensome."  (emphasis added).

The full letter is here.  

***

NCUA/CFPB Webinar.  NCUA will be hosting a town hall webinar on February 5th at 3:00 p.m. EST.  The webinar will feature both NCUA Chairman Debbie Matz and CFPB Director Richard Cordray.  I strongly encourage you to watch, if you can.  I also encourage you to ask questions (both during the event and prior to).  You can submit questions or concerns by sending an email to [email protected] with the subject line "NCUA-CFPB Town Hall."   

You can register here.  Remember, February 5th at 3:00 p.m. EST.    

CFPB Finalizes First Three Mortgage Regulations: Qualified Mortgages; Escrows; & HOEPA

Written by Steve Van Beek

Did you hear that?  No worries, it was just the sound of thousands of dying trees after the CFPB's first three mortgage regulations were finalized.  If you heard a second noise, it was probably your printer dying. 

***

Now, on to the good stuff.  Initially, it is good idea to overview which rules were finalized and which are coming next.

Which Three Regulations?  Yesterday, the CFPB finalized the qualified mortgage rule (AKA the ability-to-repay rule), the escrow rule for higher-priced mortgages, and the HOEPA/High-Cost/Section 32 mortgage rule.  

What is Left?  It is expected that the CFPB will finalize the remaining regulations on January 17th at their field hearing in Atlanta.  Which ones?  Mortgage servicing (both Reg Z and Reg X), mortgage loan originator compensation (and much more - including SAFE Act angles), appraisals for higher-risk mortgages, and Regulation B appraisal disclosure requirements.  Yikes! 

Of course, it is always possible the CFPB waits on one or two of these - especially given that neither the higher-risk appraisals or Reg B appraisals are listed on the CFPB's latest Regulatory Agenda.  But, be prepared for all of these to be coming out soon.  

What about TILA/RESPA Integrated Disclosures?  The new disclosure forms will be finalized later in 2013.  Dodd-Frank mandated that the CFPB propose new regulations by July 21, 2012 but it did not mandate a timeframe for the final regulation.  

***

Qualified Mortgages - Ability-to-Repay.  This is the one that got all the press yesterday.  There was the field hearing, the press release, Cordray's prepared remarks, the blog post, the Fact Sheet, the Summary and.........finally, the final rule (804 pages).  

The CFPB created a special page for each new final rule and you can find the Qualified Mortgage/Ability-to-Repay page here.

This page includes the full final rule and it also takes a page out of this blog's playbook and breaks the new rule down by preamble, regulatory text and official interpretations.  

Effective Date:  The final rule contains an effective date of January 10, 2014.

Concurrent Proposal:  The CFPB also proposed changes to the just finalized regulation.  The proposal can be found here.  Including the preamble, regulatory text and the official interpretations.   

Of course, we'll have more on this final rule and the proposed rule in the future.

***

Escrow Final Rule - Higher-Priced Mortgages.  To much less fanfare, the CFPB also finalized a rule on escrow requirements for higher-priced mortgages (the original proposal was from the Federal Reserve way back in March 2011).  The CFPB released a consumer guide on this rule (where is the compliance officer guide?)  There is also a one-page summary here.

The CFPB's special page for the escrow final rule is here.

The full final rule is here (116 pages).  There are also separate documents with the preamble, regulatory text and the official interpretations.

Effective Date:  This final rule is effective June 1, 2013.     

***

HOEPA/High-Cost Mortgage - Final Rule.  The CFPB also finalized a rule implementing changes to high-cost mortgages.  A consumer guide for this rule is also available.  A three-page summary is here.     

The CFPB's special page for the HOEPA/High-Cost final rule is here.

The full final rule is here (431 pages).  There are also separate documents with the preamble, regulatory text and the official interpretations.

Effective Date:  This final rule is effective January 10, 2014.

Importantly, this final rule did not include a decision on whether to expand the definition of finance charge.  That decision will be made as part of the TILA/RESPA Integrated Disclosure final rules.   

***

Adding It Up.  So, that is 804 + 116 + 431 = 1351 new pages.  And, more to come next week.

And, silly me, I thought I'd be able to finalize the third Game of Thrones book prior to the show starting back up.  

Bonus:  While there are many resources above, I wanted to share my personal favorite.  Have a great weekend!  

NAFCU Letter on Effective Dates; Field Hearings on Mortgages - Qualified Mortgages Rule; School Deadline

Written by Steve Van Beek

You've probably heard the rumors that the first of the CFPB's mortgage regulations are expected to be released today. In anticipation of this, NAFCU sent another comment letter to the CFPB encouraging flexibility with regard to effective dates: 

"NAFCU believes that the CFPB does have the discretionary authority to provide much longer than the publically stated 12 months for one or more of the final rules. While we understand that Title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) provides a set effective date for the agency’s “qualified mortgages,” the CFPB can assert its greater discretionary rulemaking, examination and supervisory authorities to determine that 12 months is an inadequate period for financial institutions to effectively implement the regulations. In fact, NAFCU believes that this short period could lead many financial institutions to improperly implement the regulations, thus diminishing the statutory purposes underlying the regulations.

Alternatively, the CFPB could use its broad authority to consider the regulatory burden on small entities and provide an extended effective date for all credit unions. As we have stated on numerous occasions, Congress granted the CFPB this authority with the understanding that small entities will be disproportionately affected by the agency’s extensive regulations issued pursuant to the Dodd-Frank Act. NAFCU believes that the issue of the effective dates of these rules is well within the scope of the agency’s discretionary authority related to small entities."

We hope the CFPB will seriously consider the differences between the big banks and nonbank mortgage lenders on one hand and credit unions and community banks on the other.  Both in terms of whose actions lead to Dodd-Frank and which should have the obligation to restructure their entire mortgage operations within a short period of time.  

***

Field Hearings.  Today marks the first of two planned Field Hearings on mortgages that were announced by the CFPB.  Today's hearing will be at 11 a.m. in Baltimore, Maryland (at Westminster Hall and Burying Ground).  The second will be January 17th in Atlanta, Georgia (hopefully at a less foreboding location).  According to the announcements, each field hearing will feature remarks from CFPB Director Richard Cordray, as well as testimony from consumer groups, industry representatives, and members of the public.   

Additionally, if the past is any indicator - the CFPB will be announcing their final rules either prior to the field hearings or directly following the hearings.  Stay tuned.

*** Update ***

Qualified Mortgage Final Rule - (Updated at 7:00 a.m. on 01/10/13).  Early this morning (12:01 a.m.), the CFPB announced it has finalized the qualified mortgages regulation.  This is also known as the ability-to-repay mortgage rule.  You can find information on the final rule below.

• Summary of the Ability-To-Repay Rule (and Concurrent Proposal)
• Fact Sheet on the Ability-To-Repay Rule (Full Title is:  Protecting Consumers from Irresponsible Mortgage Lending)
• Press Release on Ability-To-Repay
• CFPB Director Cordray's Prepared Remarks

In true CFPB fashion, the actual regulation isn't available yet - but will be posted on their regulations page later today.  An interesting way to control the news reporting, isn't it?  Give out just the highlights from the CFPB's perspective and don't release the details.  By the time the details (and the associated burdens) come out, the CFPB's message is already out and through the news cycle.  

For more, check out the NAFCU Today.  Of course, NAFCU's Regulatory Affairs team will be preparing a Final Regulation for NAFCU memebers. 

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NAFCU's Regulatory Compliance School.  Just a reminder that the early bird deadline for registering for NAFCU's 2013 Regulatory Compliance School ends tomorrow - January 11th.  Register by COB tomorrow and Save $100.  

Don't Forget:  Use promo code "NEWYEAR" when you register for School, Seminar or any of NAFCU's 2013 Conferences and save an additional $100.  Register by January 31st to Save.  

ATM Fee Disclosure Bill Signed; HMDA Reporting Threshold

Written by Michael Coleman, Regulatory Compliance Counsel

ATM Fee Disclosure Bill. On Thursday, December 20^th, 2012, President Obama signed the ATM Fee Disclosure bill (H.R. 4367) into law. We previously blogged about the impact this law has for credit unions, including the reduction of litigation risk, state law impacts, removal of the physical signs, and updates to Regulation E.

Now that the bill has been signed into law, the federal requirement for posting a physical notice on the ATM itself has been removed. Therefore, the credit union’s litigation and compliance risk going forward was reduced effective December 20, 2012.  This will allow credit unions to reduce the time and effort and costs spent tracking, photographing, documenting and auditing the notices on your ATMs.

State Law. As noted before, although the federal requirement for the physical notices has been eliminated, there still may be state laws which require a physical notice on ATMs. Two states that we are aware of that have such laws are New York (NY Gen Bus § 399-y) and Nevada (Nev. Rev. Stat. Ann. § 660.052). You might want to check your own state’s laws and perhaps consult your local counsel with regards to any state law requirements that might affect your credit union. If you find applicable state law citations, please feel free to let us know.  

Removal of Notices. While the notices are no longer required on the actual ATMs, there is really no harm in leaving them there, and no reason to immediately remove the existing notices from the machines. The extra notice provided by the sign is still a service to member and non-member ATM users, and as mentioned above, there may be state law requirements for on machine disclosures.

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2013 HMDA Asset Threshold. On December 28, 2012 the CFPB announced  the 2013 HMDA asset threshold, the final rule was published in the Federal Register on December 31, 2012. Institutions with assets of $42 million or less as of December 31, 2012, are exempt from HMDA reporting in 2013. The CFPB was a bit more timely with the publication of the threshold this year (they announced the 2012 threshold on February 15, 2012), let’s hope the trend continues.

HMDA Data Entry Software.  The free FFIEC HMDA Data Entry Software, version 2013 for calendar year 2013 data due March 3, 2014 is now available for download.

NCUA HMDA Webinar. NCUA will host a free webinar on January 24, 2013 at 2pm EST entitled “HMDA: Accuracy and Timeliness.” During the webinar experts from NCUA and the Federal Reserve Board will:

• address common errors identified in HMDA LAR data and submissions;
• provide tips for preparing and submitting accurate and timely HMDA LARs; and
• discuss financial institution management responsibilities in the HMDA process.

You can register for the webinar here. See NCUA’s press release for more details.

2012 HDMA Data. Reminder: For those credit unions over the 2012 threshold, your HDMA data for calendar year 2012 must be submitted by March 1, 2013.

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Redskins, Again. Last week was the end of the NFL’s regular season, and the Redskins came up big time defeating Dallas to win the NFC East for the first time since 1999 and secure their first playoff berth since 2007. Needless to say, this weekend’s playoff game against Seattle has this Skins fan excited!

  

Reminder: CFPB Website Reference for Credit Card Application & Account Opening Disclosures; NAFCU Closed for the Holidays

Written by Michael Coleman, Regulatory Compliance Counsel

The end of 2012 is fast approaching, and so are compliance deadlines (although if you are reading this we have successfully avoided the end of the world according to the “interpretation” of the Mayan calendar, so we have that going for us). Yesterday we blogged about required updates for adverse action notices and risk based pricing notices. Today we would like to focus on credit cards updates required by January 1, 2013.

Regulation Z - Credit Card Application & Account Opening Disclosures

When the CFPB republished Regulation Z, Sections 12 CFR 1026.60 (applications and solicitations) and 12 CFR 1026.6 (account opening disclosures) were changed to reflect the CFPB's authority over Regulation Z and credit cards.  

After January 1, 2013, your credit card disclosures would need to reference the CFPB (in the past they mentioned the Federal Reserve).  You can see the small change by viewing the Fed's prior G-10(B) model form with the CFPB's current G-10(B) model form.    

Here is the language from the application and solicitations disclosure regulation - 12 CFR 1026.60(b)(15):

"(15) Web site reference. A reference to the Web site established by the Bureau and a statement that consumers may obtain on the Web site information about shopping for and using credit cards. Until January 1, 2013, issuers may substitute for this reference a reference to the Web site established by the Board of Governors of the Federal Reserve System."

Similar language is included in 12 CFR 1026.6(b)(2)(xiv) for account opening disclosures. 

Note:  This disclosure is only required for credit card accounts.  Thus, the change would only need to be made on your credit card application and solicitation disclosures and your credit card account opening disclosures.

Additional details and discussion available in this January 10, 2012 blog post.  

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NAFCU’s Offices Closed for the Holidays – Just a reminder that NAFCU’s offices will be closed all next week and through the beginning of the new year. The blog will also be on hiatus during this period. NAFCU’s offices will re-open on Wednesday January 2, 2013, and we will be back to blogging as well to start off the new year. From all of us here at NAFCU, we wish you and yours a safe, happy, and hopefully restful holiday season!  

NAFCU's Meeting with CFPB Director Cordray

Written by Steve Van Beek

A couple of weeks ago, the NAFCU Board of Directors along with our senior staff met with Director Cordray and a few key players on the CFPB's rulewriting team.  You can read a news recap of the meeting here.  However, today I wanted to give you a brief rundown of some of the issues that NAFCU discussed with the CFPB.    

• Qualified Mortgages and the Ability to Repay Rule.  NAFCU indicated the CFPB needs to provide a safe harbor for qualified mortgages (rather than a rebuttable presumption).  NAFCU also discussed the difficultly of tying the qualified mortgage determination to metrics (debt-to-income ratio, etc.) because the metrics cannot take into account non-quantitative factors.   

• Proposal to Change Definition of Finance Charge.  NAFCU discussed the CFPB's proposal to amend the definition of finance charge - which would alter how the annual percentage rate (APR) is calculated.  We argued this change was not required by Dodd-Frank and the CFPB shouldn't add this large compliance burden to credit unions.  We have previously blogged on this issue here (drop the APR proposal), here (NAFCU's official comment letter) and here (potential impact on FCU usury ceiling).  

• Points & Fees.  NAFCU discussed how CFPB's proposed points and fees tests have the potential to hurt credit unions that have CUSOs.  The CFPB's proposals might treat fees from affiliates differently than fees from non-affiliates and this could make a credit union's mortgage look less competitive.  

• Remittances.  NAFCU provided an overview of the challenges facing credit unions as they try to comply with this new rule.  Credit unions are facing a huge compliance burden and many are working with third parties to find a solution.  But, that also brings with it third-party due diligence costs and considerations.  Many credit unions will be forced to stop offering remittances and those that continue to offer remittances will see a large fee increase passed along to their members.  

• Providing Formal Opinion Letters or Other Guidance.  NAFCU urged the CFPB to provide an avenue for credit unions to obtain a formal opinion from the CFPB.  A prior example was the CFPB's unwillingness to provide a formal opinion on the Change-In-Terms Notice issue that we blogged about in mid-October.  If the CFPB would have provided formal guidance, it would have saved credit unions lots of time and money (not to mention the reduction in headaches).  

Quick Tidbits.  The CFPB seemed interested in the issues NAFCU was raising.  Unfortunately, it did not seem they had the time or inclination to make the changes.  The CFPB pointed back to Dodd-Frank repeatedly to indicate that their hands were tied by Congress.  However, they did indicate they are looking at 12 month implementation period for the majority of the mortgage rules.  And, they are looking at how to improve their communication of the final rules to regulated entities (including a "plain English" guide of the mortgage changes).   

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NAFCU Offices Closing.  Just a heads up that NAFCU's offices will be closed next week and through the beginning of the year.  We won't be blogging during this period.  Of course, we don't need to tell anyone that 2012 has been a challenging year on the compliance front.  And, 2013 promises to bring many additional challenges as well.  We'll be charging our batteries and getting ready for 2013 and we hope you are able to as well.