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Dec. 21, 2018

Federal regulators’ council urges strong state/federal collaboration

State and federal financial regulators should continue to work together to evaluate regulator overlap and duplication, the federal Financial Stability Oversight Council (FSOC) was among four recommendations contained in the group’s 2018 annual report, released Wednesday. The council also recommended that state and federal regulators work in tandem to modernize regulations and, “where authority exists,” to tailor regulations based on size and complexity of financial institutions.
The recommendations by the council, which is made up of the heads of the various federal financial regulatory agencies (including NCUA Board Chairman J. Mark McWatters; state regulators are represented by Texas Banking Commissioner Charles G. Cooper) are aimed at the agency members of the council to pursue in 2019.

Other recommendations by the council for regulators include:

  • Lend support for cybersecurity efforts to ensure agencies have the necessary authorities to “supervise and enhance third-party service provider information security.” In particular, the report states that the council recommends Congress pass legislation that ensures that NCUA, the federal banking agencies and the Federal Housing Finance Agency (FHFA) have adequate examination and enforcement powers to oversee third-party service providers.
  • Complete transition to a new, alternative reference rate (essentially, to replace LIBOR (London Interbank Offered Rate) with the new “SOFR” (secured overnight financing rate), with member agencies encouraged to “work closely with market participants to identify and mitigate risks from potential dislocations during the transition process.”
  • Continue monitoring levels of nonfinancial business leverage, trends in asset valuations and potential implications for the entities council member regulators supervise in order to “assess and reinforce their ability to manage severe, simultaneous losses in those markets.”

Financial Stability Oversight Council Releases Annual Report


Saying it is more important to focus on what the federal consumer financial protection agency does, rather than what it is called, new CFPB Director Kathy Kraninger this week told her staff that she had pulled the plug on a name change instituted by her immediate predecessor. In a memo, Kraninger – who was sworn into office just last week -- told agency staff that she has officially halted all ongoing efforts to make changes to existing products and materials related to the “name correction initiative.” “For statutorily required reports, legal filings, and other items specific to the Office of the Director, we will use the Bureau seal and the statutory name we were given in Dodd-Frank," Kraninger said. “The name 'Consumer Financial Protection Bureau' and the existing CFPB logo will continue to be used for all other materials."

Last April, her predecessor Acting Director John (“Mick”) Mulvaney said he was – unilaterally -- officially changing the name of the agency to “Bureau of Consumer Financial Protection.” Since its inception eight years prior to that, the agency had been known as CFPB. But just last week, an internal analysis from the bureau surfaced asserting that continuing the name change could cost the agency up to $19 million – and, for the entities the bureau regulates (including credit unions), up to $300 million to update their databases, regulatory filings and disclosure forms with the new name to be in compliance with the rules enforced by the agency. At least one member of Congress had called, before Kraninger announced her course on the bureau name, for a probe by the inspector general of the Federal Reserve (who oversees CFPB) about the costs outlined in the analysis.


Consumers are relying more on their cards, both credit and debit, in making their payments – and debit cards are increasingly becoming their card of choice, the Federal Reserve said in a report issued Thursday. In the Federal Reserve Payments Study Supplement, the Fed said payments by cards – credit and debit -- grew in both number and value since last year, by 10.1% and 8.4%, respectively, boosted by continued strong growth in the number of card payments made remotely, including for shopping and bill paying. Additionally, a “surge” in payments by debit cards was also seen last year, the Fed said. Total credit card, non-prepaid debit card, and prepaid debit card payments increased by 11.3 billion to 123.5 billion payments by number from 2016 to 2017. The value increased, the Fed said, by $500 billion to $6.5 trillion. The debit “surge,” the Fed said, came in the number of prepaid and non-prepaid debit card payments relative to credit card payments – a “departure from previous reporting periods,” the agency said. Overall, the Fed said, increases in debit card payments – which made up two-thirds (66.9%) of card payments last year by number – grew by 6.5%. That growth included a 7% increase in non-prepaid card payments, and a 3% increase in prepaid debit card payments.

Federal Reserve Payments Study Supplement shows accelerated electronic payments growth


While alternative data is helpful for financial technology or “fintech” companies to use in determining borrowers’ creditworthiness, the Consumer Financial Protection Bureau (CFPB, formerly known as the BCFP) and the federal banking agencies should communicate with these lenders about how to use the data, according to a report issued this week by the Government Accountability Office (GAO).

In its report Financial Technology: Agencies Should Provide Clarification on Lenders' Use of Alternative Data, GAO said use of alternative data – such as supplementing traditional data (credit scores, for example) with information about a borrower’s college degree – may make loans available to more people. However, the congressional watchdog pointed out, use of such data could also have unintended effects.

“GAO recommends that BCFP and the federal banking regulators communicate in writing to fintech lenders and banks that partner with fintech lenders, respectively, on the appropriate use of alternative data in the underwriting process,” GAO wrote in its report. GAO also noted that the agencies each stated that they plan to take action to address GAO’s recommendations.

The report notes that both the consumer bureau and the banking regulators have monitored fintech lenders’ use of alternative data by collecting information and developing reports on alternative data. “But they have not provided lenders and banks with specific guidance on using the data in underwriting,” GAO wrote.

Agencies Should Provide Clarification on Lenders’ Use of Alternative Data


Credit union trade and industry groups filed a joint amicus brief late last week to support NCUA’s appeal of a decision earlier this year that overturned the agency’s field of membership (FOM) rule, adopted in 2016. The joint brief – filed by the Credit Union Natl. Assn. (CUNA), CUNA Mutual Group and the National Association of Federally-Insured Credit Unions (NAFCU) – backs up NCUA as it appeals a March 29 U.S. District Court decision vacating two provisions of the agency’s chartering and field-of-membership (FOM) rule, adopted in 2016 and which took effect in February 2017. The original lawsuit was brought against NCUA by the American Bankers Association (ABA). The three credit union groups told the U.S. Court of Appeals for the District of Columbia Circuit (among other things) that the ABA lawsuit “is a clear and transparent attempt by bank lobbyists to hamstring credit unions’ ability to help more American consumers,” and that “it is vital NCUA have the authority to interpret relevant statutes and modernize its regulations as needed to help credit unions better serve their members while maintaining safety and soundness.” No date has yet been set by the court for oral arguments.

Joint amicus brief by credit union groups


Implementation of NCUA’s risk-based capital (RBC) rule would be delayed to January 2021 – a two-year hiatus from its original implementation date and adding one more year to NCUA’s own delay of the rule’s effective date to January 2020 – under legislation introduced last week by Sen. Mike Rounds (R-S.D.). The “Common Sense Credit Union Capital Relief Act of 2018” (S.3750) is a companion bill to a House measure (H.R. 5288) introduced by Rep. Bill Posey (R-Fla.) in March; that bill has advanced no further. While there is scant time for the Senate to act on Rounds’ bill, there is a chance that it could be included in a short-term spending bill. However, the version of that bill adopted by the Senate Wednesday did not include the RBC provision. The House on Thursday was still considering what it would do with a spending bill, leaving a chance that the RBC delay bill – a non-controversial provision -- could be included.

BRIEFLY: OCC’s Otting to also head FHFA; Last NR of 2018, see you Jan. 4, 2019

Late Thursday, President Donald Trump announced he will appoint Comptroller of the Currency Joseph M. Otting to become acting director of the Federal Housing Finance Agency (FHFA) after the term of current director Melvin Watt ends Jan. 6. Otting will continue his job as comptroller while serving FHFA, the White House said … This is our last NASCUS Report for the 2018 – our 50th issue since the year began (we skipped a week in August). Over the past 12 months, we’ve reported on the latest developments from Washington affecting the state credit unions system, NASCUS’ voice in those developments, and our associations actions and efforts throughout the year. Although we’re taking off next week, we’ll be back in 2019 with our first issue of the year Jan. 4. Happy holidays, Happy New Year – and see you in 2019!

Information Contact:
Patrick Keefe,