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Jan. 12, 2018

Action over CFPB leadership,
McWatters appointment heats up

A shifting environment for the next leader of the CFPB was on display this week as: one potential candidate for the agency director endorsed another; yet another candidate took a new job; a federal court rejected a challenge to the current acting director; and a bankers’ group spoke out against a candidacy. Given that now-NCUA Board Chairman J. Mark McWatters has been identified as a leading candidate for the permanent CFPB director’s position, some of the developments may contribute to clearing the way for his nomination, while the others may work against it. (The NCUA Board Chairman has remained publicly silent about the prospect.)

Early this week, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said in a statement that he encourages President Donald Trump to nominate McWatters. The endorsement may be crucial: Hensarling himself, up to this week, has been considered a leading candidate to head the consumer agency. “Having worked closely with Mark in the past, I know him to be incredibly smart, a real free market conservative and an effective reformer,” Hensarling said. “Mark has my utmost confidence and I encourage President Trump to nominate him.”

Meanwhile, the other leading candidate for the job – former Acting Comptroller of the Currency Keith Noreika – announced he was rejoining the law firm he left last spring to become acting head of the bank regulatory agency. Appointed by Trump, Noreika stepped down as the acting OCC leader in early December, after Joseph Otting was confirmed as comptroller.

Rounding out the week’s developments: a federal court affirmed President Donald Trump’s appointment of CFPB Acting Director Mick Mulvaney, rejecting a challenge from Deputy Director Leandra English. That development may, however, slow down a McWatters appointment by reducing pressure on the White House to name a successor to Mulvaney. Under the law under which Mulvaney was appointed, he may serve for as long as 210 days. If a nomination is pending in the Senate, the restriction is suspended. The 210-day clock starts again if the Senate rejects a nomination.

Not everyone is pleased with a McWatters CFPB candidacy: The Independent Community Bankers of America has voiced publicly (in the American Banker, a trade publication) its opposition: “As the head of a regulatory agency that advocates on behalf of the tax-free sector of the financial services industry it is charged with regulating, NCUA Chairman J. Mark McWatters would not be a wise choice to head the CFPB,” wrote Camden Fine, chief executive of the bankers’ association.


Proposed rules on overdraft protection and communications in debt collections, as well as efforts to identify and relieve regulatory burden for financial services providers and small businesses, are on the agenda for 2018 by the CFPB – but proposed regulations may never come forward.

The agency submitted its semiannual regulatory agenda for publication this week. However, the agenda was developed before the leadership change at the agency in November, when Mick Mulvaney was named acting director. Changes are surely to be made to the agenda; in fact, in its filings with the Federal Register, CFPB said it plans to publish the next agenda this spring, updating it through fall 2018. According to reports, the agenda does not reflect the CFPB’s rulemaking plans under the Trump Administration. In fact, unlike past regulatory agendas, there is no mention of this one on the agency’s website (typically included in the blog).

Nevertheless, the document (dated Sept. 28) lists several key issues that the bureau is considering, including:

  • Overdraft programs: The bureau said it is preparing for a “potential rulemaking” regarding the overdraft programs on checking accounts, citing several years of research leading it to believe that “there are consumer protection concerns with regard to these programs.”
  • Debt collections: A proposed rule is expected to be released concerning “Fair Debt Collection Practices Act” (FDCPA) communications practices and consumer disclosures.
  • Supervision of non-bank entities: The agenda notes the bureau is “continuing rulemaking activities” to ensure “meaningful supervision” of non-bank financial services providers in order to create “a more level playing field” for depository and non-depository institutions.
  • Remittances, mortgage rules: The agency plans to publish five-year assessments on the effectiveness of its rules in these two areas; the remittance transfers rule report is expected in October, and the report on mortgage rules in January, 2019.
  • Review of existing rules: The agency began work last fall to review existing regulations that it inherited from other agencies through the transfer of authorities under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). “The Bureau expects to focus primarily on subparts B and G of Regulation Z, which implement TILA with respect to open-end credit generally and credit cards in particular,” the agency stated.
  • Electronic funds transfer: The agency is considering modernizing Regulation E (Electronic Fund Transfer Act (EFTA)) to address issues of concern in connection with data aggregators.
  • Regulatory burden: The agency has launched an internal task force to “coordinate and bolster the agency’s continuing effort to fulfill its mandate to identify and relieve regulatory burdens, including with regard to small businesses,” the agency stated. “The task force is currently engaged in reviewing ideas for reduction of regulatory burden that have been suggested by Bureau stakeholders.”

CFPB Semiannual regulatory agenda (prepared September 2017)


If you’ve looked at the CFPB web pages since the first of the year, particularly the agency’s mission statement, you may have noticed a change --- to the statement itself. It now reads: “The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives.” Words in italics indicate new language added. Before the holidays, the statement read: “The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.” Note that the words “and fairly” were removed from the prior version as well.


Five more proposed “regulatory relief” bills were aired during a House subcommittee hearing this week, advertised as “part III” of the overall regulatory relief effort by the House Financial Services committee. The bills under consideration during the before financial institutions would (among other things):

  • Generally exempt financial institutions with less than $50 billion in assets from Consumer Financial Protection Bureau (CFPB) rules (the Community Financial Institution Exemption Act, H.R. 1264);
  • Delay inclusion (and set requirements for bill collectors) in veterans’ credit reports of inappropriate or delayed billing payments from the Veterans Affairs Department (Protecting Veterans Credit Act of 2017, H.R. 2683);
  • Provide temporary enforcement relief from new data collection and reporting requirements under the Home Mortgage Disclosure Act (HMDA) (Home Mortgage Reporting Relief Act of 2017, H.R. 4648);
  • Allow for reduced call reporting in the first and third quarters for banks with assets of less than $5 billion (Community Bank Reporting Relief Act H.R. 4725), and;
  • Amend the Truth in Lending Act to clarify the exclusion for seller-financers from the definition of mortgage originator (not yet numbered, no formal name).

Witnesses at the hearing took differing views of the bills. Community banker Robert M. Fisher, president and CEO of Tioga State Bank, Spencer, N.Y., noted the “common theme of these bills is suffocating regulation” which raises costs and reporting requirements which “provide vastly more data than regulators need for bank supervision.” On the other hand, consumer advocate Scott B. Astrada of the North Carolina-based Center for Responsible Lending (CRL) told the panel that “the legislative proposals before the committee today are each a piece of a larger attempt to dismantle essential consumer protections and deregulate the financial industry.”

Legislative Proposals for a More Efficient Federal Financial Regulatory Regime: Part III” 


Different views over whether federal anti-money laundering systems are broken, or not, emerged during a Senate Banking Committee hearing Tuesday – but all sides called for some adjustments going forward. The committee is considering legislation to revise and, in some cases, reform BSA/AML requirements (such as raising the reporting requirements for “suspicious activity reports” (SARs) from $10,000 to $50,000).

Dennis Lormel, a former chief of the FBI’s financial crimes program, told the committee that the federal BSA program is not broken. “The system is fraught with many inefficiencies but it works,” said Lormel, who is now president and CEO of DML Associates, a law-enforcement consulting firm.  “Law enforcement consistently receives valuable intelligence from BSA data. The challenge is that the BSA system can and should be much more effective and efficient,” he said. Lormel said, at the “core level,” the flow of BSA data from financial institutions (the “frontend provider”) to law enforcement (the “backend consumer”) is good. “When financial institutions can be proactive and more targeted in their monitoring and reporting, the BSA data they provide is more effective and efficient,” Lormel said in his written statement. “When data flow becomes convoluted and more constrained, the system becomes flawed and ineffective and inefficient.”

But Greg Baer, president and CEO of the Clearing House Association (CHA), took a directly opposite view. “Our AML/CFT (“countering the financing of terrorism”) system is broken,” Baer said. “It is extraordinarily inefficient, outdated and driven by perverse incentives.” Baer said a core problem with the current system is that it is geared toward compliance expectations “that bear little relationship to the actual goal of preventing or detecting financial crime, and fail to consider collateral consequences for national security, global development and financial inclusion.” He said “fundamental change” is required to make the current system an effective law enforcement and national security tool, and “reduce its collateral damage.”

However, Heather A. Lowe of Global Financial Integrity (a security consultant) strongly cautioned against relieving financial institutions of reporting requirements. “Banks are best placed to understand their business and their systems and the money laundering risks inherent therein, and create the systems that work best in their business models to combat money laundering,” she said in her statement. “FinCEN (the Financial Crimes Enforcement Network) and/or other regulators should review those assessments but cannot be responsible for carrying them out,” she said.

Combating Money Laundering and Other Forms of Illicit Finance: Opportunities to Reform and Strengthen BSA Enforcement


New tools for accessing data about aggregate wealth of U.S. households and other economic sectors, using “data visualization,” were unveiled by the Federal Reserve Thursday. The three new tools, the Fed said, show at a glance the evolution of key financial statistics, changes in household debt in recent years for each county and metro area, and developments in state and local pension funding for each state. Tools access data from the Fed’s Financial Accounts of the United States (Z.1) release, published quarterly. The central bank said it will add more visualization tools in the future using data sets from its Z.1 release, and from its Enhanced Financial Accounts project, which it said “augments the Financial Accounts of the United States by providing information on additional types of financial intermediation, in finer detail, and at higher frequency.”

Federal Reserve Board adds interactive data tools for the Financial Accounts of the United States to its website


Kudos to the New York Credit Union Association (NYCUA) for developing a comprehensive examination of the New York state charter versus the federal charter. In its “State Charter Resource Center” on the web, NYCUA has included a 30-slide presentation that looks at topics including taxation, field of membership, lending, trust powers, low-income designation and more. The website also includes a cost comparison of the federal versus the state charter, a rundown of the state charter conversion process (and checklist), and sample bylaws. The resources were developed by the NYCUA, it says, to “assist credit unions to better understand the state charter and how it compares to the federal charter.”

NYCUA State Charter Resource Center


NASCUS has posted on its website the initial 2018 list of Directors’ Colleges, Examiner Schools and Industry Days. The sessions, distributed across the country and aimed at credit union volunteer and executive leadership and regulator professionals, join a growing list of NASCUS events for 2018, including the NASCUS State System Summit (July 16-19, at the Disney Yacht Club, Orlando, Fla.); the NASCUS/CUNA Cybersecurity Conference (June 3-5, Nashville, Tenn.); the NASCUS/CUNA BSA Conference (Nov. 5-8, Louisville, Ky.); the NASCUS CECL Seminar, April 12 in Nashville; and the State Credit Union Regulator National Meeting (for regulators only) March 26-27, at Washington Harbor in Washington, D.C.

NASCUS 2018 Education & Training Agenda

BRIEFLY: Welcome to new members in Oregon, Kansas/Missouri, Dakotas

Welcome to the latest members of NASCUS: First Community Credit Union of Coquille, Oregon, with $1.1 billion in assets and 76,000 members (David Elmer, president and CEO); Heartland Credit Union Association, serving Kansas and Missouri (Brad Douglas, President and CEO), and; Credit Union Association of the Dakotas (Jeff Olson, President & CEO).

Information Contact:
Patrick Keefe,