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Oct. 14, 2016

On payday loans, let state rules
be the guide, NASCUS writes

Out of concern that the CFPB’s payday lending proposal will hinder the ability of state chartered credit unions to administer innovative short-dollar loan programs, NASCUS has urged the agency in a comment letter to provide compliance exemptions for states that have in place “comparable regulation” to avoid increasing the regulatory burden on an “already heavily regulated class of entities.” Additionally, NASCUS urged the bureau to be prepared to address “anticipated state requests for inconsistency determinations regarding their existing short-term, small amount regulations.”

In its comment letter on the bureau’s proposed rule on Payday, Vehicle Title and Certain High-Cost Installment Loans (Docket No. CFPB-2016-0025), NASCUS wrote that where a state has an effective short term, small dollar loan regulation in place that is not inconsistent with the spirit of the bureau’s proposal, the bureau defer to the state’s authority to regulate these products and services. “NASCUS believes a state’s legislature and state supervisory agency are in the best position to determine the most effective means to protect its consumers within the long-standing parameters of existing credit union regulation and supervision,” NASCUS wrote.

NASCUS reminded the bureau that the state credit union system has a history of encouraging innovation in consumer financial product and service development, while maintaining safe and sound business practices. “Many states currently have consumer protection regulatory schemes in place to address bad actors and encourage provision of fair and reasonably priced short term consumer credit,” NASCUS wrote. “For example, the state of Colorado enacted legislation in 2010 to stymie bad actors and protect pay day borrowers.”

NASCUS noted that it supports the agency’s efforts to curb abusive practices. However, the association cited concerns the proposal would hinder credit union payday product services. Noting the extensive underwriting process required under the proposal, NASCUS stated that it would result in higher costs for the lender. Those costs, NASCUS wrote, would then have to be passed on to the consumer “or could result in the termination of the credit union’s short term, small dollar lending program.”

NASCUS comment letter to CFPB/small dollar loans


Information about NCUA’s budget was, as this Report was distributed, still expected to be released today, in advance of the board’s budget briefing Oct. 27. Documents related to the budget, according to NCUA, will be posted on the agency’s budget and supplementary materials page. Detailed instructions about the public attending the briefing in two weeks are also expected to be released then. In September, the agency announced it would hold a two-hour public briefing on its proposed 2017-18 budget on Oct. 27 (from 2 p.m. to 4 p.m.). In a release announcing the briefing, the agency stated that it “plans to release its draft budget during the week of Oct. 9 to give interested parties ample time to review the document prior to the briefing.”

NCUA Sept. 7 press release announcing budget briefing
NCUA budget and supplementary materials web page


A federal court this week ruled that the single-director structure of the Consumer Financial Protection Bureau (CFPB) as devised is unconstitutional, representing too great a concentration of executive power – and that the director, consequently, must serve at the will of the president (and not be subject for removal only “for cause”). The ruling did not suspend the agency, nor rule its enforcement actions or regulations to date were unconstitutional. The decision, reached by the U.S. Court of Appeals for the D.C. Circuit, found that the way the law creating the consumer bureau is written is unconstitutional, in that the CFPB is the first agency to concentrate administrative powers in an independent single director not removable except for cause. To remedy that, the court ruled to strike the clause in the Dodd-Frank Act (the enabling legislation for the CFPB) which said the director could be removed "for cause," effectively allowing the president to dismiss the head of the agency at will. In remanding the case (brought by PHH, a nonbank mortgage lender, against CFPB Director Richard Cordray) back to federal district court with the recommended remedy, the court stated that “the targeted remedy will not affect the ongoing operations of the CFPB. With the for-cause provision severed, the president now will have the power to remove the director at will, and to supervise and direct the director.”


The world’s largest credit union -- with nearly $80 billion in assets -- was fined and ordered to “pay redress” to its members totaling $28.5 million by the CFPB this week for “improper” debt collection practices. In a consent order, CFPB stated that Navy FCU of Vienna, Va., made false threats about debt collection to its members, and unfairly restricted account access when members had delinquent loans. The practices cited by CFPB occurred between January 2013 and July 2015. The case is being watched closely by credit unions – including the state system -- particularly as it concerns an issue that will most likely impact all credit unions when the Bureau issues its next debt collection outline (the most recent was issued this past summer). CFPB stated that the credit union deceived consumers to get them to pay delinquent accounts by falsely threatening severe actions “when, in fact, it seldom took such actions or did not have authorization to take them.” The credit union, with more than 6.3 million members, has a membership that includes active-duty military, retired servicemembers, and their families. The Bureau stated that Navy is correcting its debt collection practices and will pay roughly $23 million in redress to victims along with a civil money penalty of $5.5 million. In addition to compensation to its members and the civil money penalty, the credit union is also required to correct its debt collection practices and ensure consumer account access. Navy FCU settled the charges without admitting or denying wrongdoing. In a statement, the credit union said It has made “all the necessary changes” to its collection practices, and has cooperated with CFPB throughout the process. “We remain steadfastly focused on upholding our standards of service excellence and the trust of our membership,” the credit union stated. 

CFPB/Navy FCU consent order

CFPB proposals to Overhaul Debt Collection Market


Overdraft practices and issues identified through consumer complaints, examinations and enforcement actions is the focus of a federal interagency webinar set for Nov. 9, sponsored by the Federal Reserve. The free, one-hour event (from 2-3 p.m. ET) will include representatives from the Fed, NCUA, CFPB, FDIC and the OCC. Registered participants may submit questions in advance via email by Oct. 21; see the registration page for details.


Registration for Federal Reserve webinar/overdraft


The NASCUS/CUNA Bank Secrecy Act Conference, set for Nov. 13-16 in San Antonio, again has been approved for continuing education credits through the Association of Certified Anti-Money Laundering Specialists (ACAMS), which describes itself as the largest international membership organization dedicated to advancing the professional knowledge, skills and experience of those dedicated to the detection and prevention of money laundering. According to ACAMS, the credits are only eligible for those individuals who participate during the live delivery of the program. The BSA Conference is the oldest such conference for the credit union system. It offers compliance officers, state and federal examiners, industry experts and regulators — from beginners to veterans — a forum for discussing and learning about the very latest on the complex federal BSA laws. See the link for more information and to register.

NASCUS/CUNA BSA Conference Nov. 13-16, San Antonio.


In addition to the BSA Conference (noted above), NASCUS is offering a solid education schedule for the fall months, which includes directors’ colleges, a session on the new member business lending (MBL) rule and a look at the upcoming current expected credit loss (CECL) accounting standard, as adopted by the Financial Accounting Standards Board (FASB). The CECL session is a one-hour webinar in two weeks (Oct. 27). The program is designed to provide participants with an informed place to begin the process of implementing CECL, as well as recommended next steps. The directors’ colleges are set for Austin, Texas (Nov. 10) and Hartford, Conn. (Dec. 8). The MBL school is set for Dec. 6-7 in Nashville. For registration costs and additional information, see the link.

NASCUS educational offerings for fall ‘16

BRIEFLY: Overdraft practices, issues topic for Fed/interagency webinar

Overdraft practices and issues identified through consumer complaints, examinations and enforcement actions is the focus of a federal interagency webinar set for Nov. 9, sponsored by the Federal Reserve. The free, one-hour event (from 2-3 p.m. ET) will include representatives from the Fed, NCUA, CFPB, FDIC and the OCC. Registered participants may submit questions in advance via email by Oct. 21; see the registration page for details. 

Registration for Federal Reserve webinar/overdraft

Fall calendar '16

Information Contact:
Patrick Keefe, NASCUS Communications, or (703) 528-5974