ARLINGTON, Va.–The credit union trade associations have sent a number of letters to the CFPB and Capitol Hill, with NAFCU responding to the agency’s announcements around payday lending rules, and both trade groups reiterating its positions ahead of NCUA Chairman Rodney Hood’s congressional testimony today and tomorrow.
NAFCU Supportive of CFPB Plans
NAFCU told the CFPB it is supportive of the agency’s proposal to remove mandatory underwriting requirements, including ability-to-repay (ATR) provisions, from its 2017 payday lending rule.
In a letter from Regulatory Affairs Counsel Kelly Schafer, sent in response to a proposal issued by the bureau earlier this year, NAFCU called for the CFPB to tailor regulations to “protect consumers against the egregious practices of traditional, high-cost payday lenders in the marketplace, while also encouraging responsible lenders to offer short-term, small-dollar loans.”
Schafer also told the CFPB the ATR underwriting requirements as currently written have negative effects on lenders that provide safe financing, and added that its removal could allow credit unions flexibility in underwriting.
Credit Unions Inhibited
"The existing mandatory ATR underwriting requirements were designed to protect consumers from triple-digit interest rates and remaining in a cycle of debt," Schafer wrote. "However, the existing underwriting requirements inhibit credit unions and other financial institutions from offering safe and affordable short-term, small-dollar lending options. Instead, consumers continue to seek out non-bank lending options which still have an annual percentage rate (APR) upwards of 400%."
NAFCU said the final payday rule addressed many concerns previously raised by the association to ensure credit unions' ability to meet consumers' needs for short-term, small-dollar loans, Shafer continued to call on the Bureau to expand the safe harbor exemption to include all future iterations of the NCUA's payday alternative loan (PAL) program.
Schafer also noted the Bureau issued a concurrent notice of proposed rulemaking to delay the compliance date for the ATR requirements from August 19 to Nov. 20, 2020. The payday rule had been set to take effect in August; however, a lawsuit was brought against the Bureau in federal court in Texas to prevent enforcement of the payday lending rule, noted NAFCU, reminding the court ultimately granted a stay of the rule's compliance date following the Bureau's announcement of a pending proposal.
“This litigation has caused confusion for lenders and potential lenders that wish to enter the marketplace,” said NAFCU. “A delay of the entire Payday Rule is necessary given the pending litigation. It will also allow the Bureau ample time to contemplate this proposed rule, including time to review obstacles not originally anticipated in the final rule – such as future iterations of PALs.
Response to CFPB Statement
Separately, following a statement from the CFPB announcing plans to review its 2009 overdraft rule, NAFCU’s EVP/General Counsel Carrie Hunt said, “As member-owned financial institutions, credit unions have responsible overdraft programs in place to help their members meet their financial needs and day-to-day expenses. Credit unions have long been heralded as a consumer-friendly lending option, and their overdraft products are often coupled with free financial education and counseling services to fully inform their members about the benefits and use of overdraft products. We appreciate the CFPB reviewing the impact of its regulations on credit unions and other small entities, and we will continue to work with the Bureau to protect consumers while examining ways to cut red tape.”
CUNA Letters Ahead of Hearings
Meanwhile, with NCUA Chairman Rodney Hood set to testify before the Senate today and the House tomorrow, CUNA President/CEO Jim Nussle sent a letter for the record that reiterates Chairman Hood’s priorities for the credit union industry, including enhancing the credit union charter, enhancing cybersecurity efforts, and reducing regulatory burden. The letter also outlines the importance of the NCUA as an independent regulator and insurer, as it is critically important that credit unions have their own regulator apart from other financial institutions.
In the letter Nussle praised NCUA for recent decisions, including the extended examination cycles, streamlined and virtual examinations, modernization of the call report, field of membership litigation efforts, and commitment to the Presidential Executive Order and rulemaking on supplemental capital.
CUNA said it continues to press NCUA to improve its rulemaking on risk-based capital.
The letter can be found here.
TCPA Safe Harbor
CUNA also sent a letter to the House Energy & Commerce Subcommittee on Communications and Commerce ahead of a hearing on accountability and oversight of the FCC.
“We continue to urge Congress to modernize its regulations for the TCPA,” CUNA said. “In today’s communications environment, it is far more likely that a credit union member will be reached on a cell phone than a landline phone. As the rate of illegal robocalls continue to rise, consumers are less likely to pick up their phones. CUNA is seeking a safe harbor for legitimate businesses, like credit unions, who make calls to consumers alerting them about fraud, debt collection and other member related information.”
The full letter can be found here.
NAFCU Letter Ahead of Oversight Hearing
In its letter ahead of the hearing on Oversight of Financial Regulators, NAFCU’s VP-Legislative Affairs Brad Thaler said that since the financial crisis, the credit union industry has lost more than 1,500 institutions.
“This dramatic consolidation is due, in large part, to increased regulatory compliance requirements,” wrote Thaler. “We urge you to continue to work to create a regulatory environment where credit unions can grow and thrive.”
NAFCU cited its five tenets of a healthy regulatory environment, which include:
- A regulatory environment that allows credit unions to grow.
- Appropriate, tailored regulation for credit unions and relief from growing regulatory burdens.
- Afair playing field.
- Governmenttransparency and accountability
- A strong, independent NCUA as the primary regulator for credit unions
A Reminder on CECL
Thaler and NAFCU said another “major concern” for credit unions is the Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss (CECL) Standard.
“The CECL standard is the most significant change in accounting rules to hit the financial services industry in decades. NAFCU believes that there is a fundamental misalignment between FASB’s objectives in developing the CECL standard and the credit union industry,” Thaler wrote. “As not-for-profit member-owned cooperatives, credit unions stand to be severely disadvantaged by this new standard and could be forced to severely curtail certain types of lending because of this standard. NAFCU has urged FASB to reconsider its approach to this proposal and provide an exemption for credit unions because the credit union industry was not responsible for the market conditions that caused the financial crisis. We ask the Committee to work with regulators such as the NCUA to come up with a solution so that credit unions and their 116 million members are not harmed by, and have the resources necessary to understand, this new standard.”