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Nov. 2, 2018

More action ahead on payday lending;
BCFP will revisit ‘ability to repay’

Proposed rules that will “reconsider” payday lending regulations are expected to be issued in January, the Bureau of Consumer Financial Protection (BCFP, formerly known as the CFPB) revealed late last week. In a statement, the bureau said it will make final decisions regarding the proposal’s scope closer to its issuance.

However, the agency said, it only plans to propose revisiting the “ability-to-repay provisions” and not the payments provisions. The bureau statement said it was making that distinction “in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions.”

The rule -- titled the Payday, Vehicle Title, and Certain High-Cost Installment Loans – was adopted more than a year ago, nominally took effect at the beginning of this year, but which mostly takes effect Aug. 19, 2019. However, the bureau has been signaling future action on the rule throughout this year, with various statements by Acting Director John (Mick) Mulvaney and listings on the agency’s rulemaking agendas (for both spring and fall).

The bureau’s approach to changes to the rule has received support from the Treasury Department, among others. In July, Treasury released a report that, among other things, recommended that BCFP rescind the payday rule. The report noted, however, that regulators should take steps to encourage sustainable and responsible short-term, small-dollar installment lending by banks. “Specifically, Treasury recommends that the FDIC reconsider its guidance on direct deposit advance services and issue new guidance similar to the OCC’s (Office of the Comptroller of the Currency) core lending principles for short-term, small-dollar installment lending,” the report says. That guidance was issued in May.

NCUA, in the meantime, has been moving forward with its own version of payday loan regulation. Last week, NCUA Board Chairman J. Mark McWatters told a group that a viable short-term loan program provided by credit unions could be an alternative to high-priced payday loans and a way to break the cycle of debt that traps millions of consumers. In May, the agency proposed amendments to its regulations on payday alternative loans that it said would give FCUs more market-based, payday alternative loan options. Comments on the proposal closed Aug. 3; the agency has not yet announced a final rule to be considered by the board.

LINKS:
BCFP Public Statement Regarding Payday Rule Reconsideration and Delay of Compliance Date

NASCUS Summary: Proposed Rule -- Payday Alternative Loans


SUMMARY OUTLINES PRIVACY NOTICE DELIVERY CHANGES

New rules on delivery of annual privacy notices that took effect Sept. 17 -- including an exception for issuing the notices, establishment of deadlines for institutions resuming annual notices if their practices change, and removal of a provision allowing for use of an alternative delivery method – are outlined in a new summary from NASCUS posted this week.

The new rules came about through the BCFP’s Regulation P, which come nearly three years after Congress acted to limit the delivery of annual privacy notices by some financial institutions, and just more than two years after the bureau proposed rules implementing the new law.

The NASCUS summary points out (among other things) that, specifically, a financial institution can qualify for the annual privacy notice exception if:

  • the financial institution does not share nonpublic personal information about consumers except as described in certain statutory exceptions such as sharing that does not trigger the customer’s statutory right to opt out.
  • the financial institution must not have changed its policies and practices with regard to disclosing nonpublic personal information from those that the institution disclosed in the most recent privacy notice.

LINKS:
NASCUS Summary: Amendment to the Annual Privacy Notice Requirement Under the Gramm-Leach-Bliley Act (Regulation P)

NASCUS 2016 summary: NCUA LTCU 16-CU-03, annual privacy letters (members only)


BUREAU SAYS REMITTANCE FINDINGS COULD INFORM FUTURE POLICY

While money services businesses (MSBs) conduct the lion’s share of consumer remittances – 95.6% of them in 2017 – the average size of remittance transfers through credit unions and banks is typically much larger, a new report from the BCFP about the effectiveness of its remittance rule finds.

The report to Congress by the consumer agency issued late last week also estimates that about 75% of credit unions and 80% of banks, respectively, fall under the rule’s safe harbor for those providing 100 or fewer remittances annually in the previous and current calendar years, making them exempt from the rule.

Overall, the bureau reports that consumers in the U.S. during 2017 transferred more than 325 million remittances worth more than $175 billion. It says MSBs conducted 95.6% of all such transfers and accounted for 68.4% of the dollar volume. Banks conducted 4.2% of transfers, but 28.8% of the dollar volume, the report says. Credit unions conducted 0.2% of remittance transfers and, the bureau estimates, 2.8% of the dollar volume based on the average dollar value of remittance transfers by credit unions in an industry survey earlier this year.

The assessment report on the remittance rule, conducted under requirements of the 2010 Dodd-Frank Act looks at all remittance rules that took effect through November 2014 and could inform the bureau in future policy decisions on remittance transfers, “including whether to commence a rulemaking proceeding to make the Remittance Rule more effective in protecting consumers, less burdensome to industry, or both,” the report states.

The report draws on a wide variety of sources, including responses to a March 2017 request for information, an April 2018 industry survey, World Bank price data, state data and data from the Nationwide Multistate Licensing System (NMLS), bank and credit union call reports, information from the bureau’s own supervision data, consumer complaints and other sources.

The summary of findings also reported:

  • The percentage of all credit unions that transfer more than 100 remittances has increased slightly. While a number of banks and credit unions stop transferring more than 100 remittances in each year, about an equal number start transferring more than 100, so the net change is small. The percentage of all banks that transfer more than 100 remittances, and thus generally subject to the rule’s requirements, has been steady or increasing since 2014, the first full year after the rule took effect.
  • The number of credit unions that report offering remittance transfers increased in the two years after the rule took effect, compared to the two years before, although that increase is likely driven at least in part by changes in the question used to collect these data. Comparable data for banks are not available before the rule took effect.

LINK:
Remittance rule assessment report (October 2018)


SMALL-ENTITY HMDA GUIDE ISSUED, REFLECTING RELIEF LAW CHANGES

A compliance guide for small-entity compliance with the Home Mortgage Disclosure Act (HMDA) was updated for changes due to this year’s regulatory relief law and issued this week by the BCFP. The “Small Entity Compliance Guide” gives an overview of an Aug. 31 interpretive and procedural rule to implement and clarify changes made to HMDA by section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155). EGRRCPA provides partial exemptions from HMDA’s data collection and reporting requirements. The guide notes that, under the exemptions, an insured credit union or depository institution or insured does need to:

  • report certain data with respect to closed-end mortgage loans if it originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years; and
  • collect or report certain data with respect to open-end lines of credit if it originated fewer than 500 open-end lines of credit in each of the two preceding calendar years.

The partial exemptions are unavailable to an insured depository institution that is subject to the Community Reinvestment Act (CRA) if the institution received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent CRA examinations, or a rating of “substantial noncompliance in meeting community credit needs” on its most recent CRA examination.

The bureau’s interpretive and procedural rule includes provisions that:

  • Clarify which data points in Regulation C (the HMDA regulation) are covered by the partial exemptions.
  • Clarify that only loans and lines of credit that are other wise reportable under Regulation C count toward the thresholds for the partial exemptions.
  • Clarify the exception to the partial exemptions for negative CRA examination history.
  • Designate a non-universal loan identifier for certain partially exempt transactions.
  • Clarify that insured depository institutions and insured credit unions that qualify for a partial exemption may optionally report exempt data points so long as they report all data fields that the data point comprises.

The rule took effect Sept. 7.

LINK:
Home Mortgage Disclosure (Regulation C) Small Entity Compliance Guide


NCUA SETS HMDA, CONSUMER COMPLIANCE WEBINAR FOR NOV. 14

A webinar on 2018 regulatory relief law revisions to the Home Mortgage Disclosure Act (HMDA) and other consumer financial protection laws and regulations will be hosted for credit unions Nov. 14 by NCUA, the agency announced recently.

The 2 p.m. session, expected to run 90 minutes, will cover amendments to HMDA and other statutes made by the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155), which was enacted May 24. The interpretive and procedural rule on the HMDA changes issued in August by the Bureau of Consumer Financial Protection (BCFP, formerly known as CFPB) will also be discussed, the announcement says.

Online registration is open now. Registrants can submit questions in advance at ocfpccpo@ncua.gov. The email’s subject line should show the title of the webinar, “NCUA HMDA and Consumer Compliance Regulatory Update Webinar.” Technical questions about accessing the webinar should be emailed to audience.support@on24.com.

LINKS:
NCUA to Host HMDA and Consumer Compliance Update Webinar

Webinar registration


APPEAL OF FOM DECISION GETS UNDERWAY WITH FILINGS

The appeal of a federal court’s split decision on field of membership issues is getting underway, as the briefing schedule for both sides – NCUA and the American Bankers Association (and amici for both) – has been set by the appeals court.

Late last week, the United States Court of Appeals for the District of Columbia set a briefing schedule in the appeal, requiring NCUA to submit a brief by Dec. 5 with amicus briefs in support of NCUA due Dec. 12. The ABA opening brief is due on Jan.  4, NCUA’s reply on Feb. 4, and the bankers’ cross-appeal reply on Feb. 19.

The briefing schedule comes in the wake of decision by NCUA to appeal a March ruling by the U.S. District Court for the District of Columbia. That decision found in favor of the ABA on two of the four issues in the case, and for NCUA on two of the four issues. The bankers’ association had challenged NCUA over chartering and FOM rule changes adopted by the NCUA Board in October 2016 and published Dec. 7, 2016, in the Federal Register.

The portions vacated in the March 29 ruling include a provision that qualifies a “combined statistical area” with fewer than 2.5 million people as a “local community” that can be served by a credit union; and one raising to 1 million people the population limit for rural districts that may be served. The court found these two provisions to be outside NCUA’s authority; other provisions challenged in the case were upheld.

In May, NCUA filed its appeal, asking the panel to review the district court’s decision on the two vacated portions of its regulation.

Also that month, NCUA told the court that it would not grant any new community charters under the vacated rule provisions while the order is in effect. The agency said it also instructed affected credit unions during this time not to accept any new members who would only be eligible for membership under those provisions. However, the agency said it will not require credit unions to de-list members who became members on or before April 4, 2018.

In early April, NASCUS published a summary of the decision (available to members only), noting that the court’s ruling decision speaks only to FCUs’ FOM, not to state credit union FOM. The decision, the summary stated, would not be controlling even in a case where a state might have a similarly worded FOM statute, because in the case of a state FOM, it would be state law, state understanding of terminology, and state jurisprudence on statutory interpretation that would matter.

LINK:
NASCUS summary/analysis, ABA vs. NCUA FOM decision (members only)


HUGHES BECOMES DEPUTY DIRECTOR IN IDAHO

Mary Hughes is the new deputy director of the Idaho Department of Finance (DOF), working with all of the agency’s entities, including those regulating credit unions, banks, collection agencies, consumer entities, money transmitters, mortgage services, securities and other agencies. Formerly, she was financial institutions bureau chief for the agency. Taking her place in that position (in an “acting” role) will be Brad Bergquist. Gavin M. Gee remains director of the DOF.

A former officer and director of NASCUS, she joined the DOF in 1990 as a deputy attorney general, primarily litigating cases brought to enforce the state’s securities and mortgage laws; she was appointed the DOF lead attorney in 1997. She served as the Consumer Finance Bureau Chief, supervising the state’s non-depository financial institutions, from 2000 until 2003, at which time she was appointed deputy director.

She is member of the State Liaison Committee for the Federal Financial Institutions Examination Council (FFIEC), serving as the NASCUS appointee to the committee.


NASCUS 101: LEARN MORE ABOUT ASSOCIATION’S MISSION, ACTIONS

More than 125 representatives of the state credit union system participated in our Fall ’18 NASCUS 101 webinar Thursday. The group learned about: the unique leadership composition of the organization (through state regulators and credit unions); the association’s distinctive membership model that includes state regulatory agencies, credit unions, credit union leagues, and industry partners (associate members); association accreditation programs, committees, the National Institute of State Credit Union Examination (NISCUE) – and more. Next year, two more NASCUS 101 sessions are scheduled (dates to be announced), so watch this space for more details. In the meantime: take a peek at the presentation webinar participants viewed – and get a head start on next year’s events.

LINK:
NASCUS 101 presentation (pdf)


BRIEFLY: BSA/AML conference next week

The nation’s premiere conference on credit union Bank Secrecy Act (BSA) compliance gets underway next week (Monday through Thursday) in Louisville. Sponsored by NASCUS and the Credit Union Natl. Assn. (CUNA), the conference focuses on latest techniques and requirements to combat illicit trafficking and money laundering to protect credit union members, as well as best practices for staying compliant under the law and regulations.

LINK:
NASCUS education agenda, 2018-19


Information Contact:
Patrick Keefe, pkeefe@nascus.org