Citing interests of states, consumer bureau
proposes big changes to payday lending rule
Proposed rulemakings to eliminate the ability-to-repay provisions of the CFPB’s payday lending rule and delay the implementation of those measures by 15 months – to Nov. 19, 2020, from August of this year – were released this week for 90-day and 30-day public comment periods, respectively, by the agency.
The proposed revisions to the rule (the “Payday, Vehicle Title, and Certain High-Cost Installment Loans”) would rescind the rule’s requirements that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. Also, the bureau “is preliminarily finding that rescinding this requirement would increase consumer access to credit,” the agency said in a release.
The agency said that its latest proposal “suggests there was insufficient evidence and legal support for the mandatory underwriting provisions” contained in the original rule, adopted in late 2017.
“Additionally, the Bureau is concerned that these provisions would reduce access to credit and competition in states that have determined that it is in their residents’ interests to be able to use such products, subject to state-law limitations,” the proposal states.
Last October, under then-Acting Director John (“Mick”) Mulvaney, the bureau announced it would issue notices of proposed rulemaking to reconsider the rule’s mandatory underwriting requirements and to address the rule’s compliance date. The bureau said Wednesday’s proposals fulfill that commitment.
The notice of proposed rulemaking on rescission of the mandatory underwriting requirement is open to public comment for 90 days following its publication in the Federal Register.
In a separate notice, the bureau also proposes to delay the Aug. 19 compliance date for the mandatory underwriting provisions of payday lending rule, to Nov. 19, 2020. This proposal is open to public comment for 30 days following publication in the Register. (A federal court has also stayed the August 2019 effective date in response to Mulvaney’s decision last year to reconsider the rule, which is being challenged by two payday lender advocacy groups.)
The 2017 final rule provisions governing payments, and scope of their coverage, are not proposed for reconsideration in the bureau’s proposals. The payment provisions prohibit payday and certain other lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless consumers consent to further withdrawals. They also require such lenders to provide consumers with written notice before making their first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels.
The proposals drew quick fire from the chairwoman of the House Financial Services Committee. “This proposal essentially sends a message to predatory payday lenders that they may continue to harm vulnerable communities without penalty,” said Rep. Maxine Waters (D-Calif.). She urged bureau Director Kathleen (“Kathy”) Kraninger to rescind the bureau’s proposal changing the existing rules, and to “work on implementing a comprehensive federal framework — including strong consumer safeguards, supervision, and robust enforcement — to protect consumers from the cycle of debt.”
BOARD TO TALK FLOOD INSURANCE, PROPOSED AUDIT RULE
A briefing on financial regulators’ recent, joint final rule on flood insurance and a proposed rule on supervisory committee audits are the two items slated for discussion during the NCUA’s Board open board meeting next Thursday. The two-member NCUA Board approved a joint agency flood insurance rule by notation vote Jan. 31 that implements the private flood insurance provisions of the Biggert-Waters Flood Insurance Reform Act of 2012. Also approved by the Federal Deposit Insurance Corp. (FDIC) and Office of the Comptroller of the Currency (OCC), (and awaiting approval by the Federal Reserve Board), the rule requires financial institutions to accept flood insurance policies that meet the statutory definition of “private flood insurance.” It also allows institutions to exercise their own discretion in accepting other plans, including those by mutual aid societies. The NCUA’s Feb. 14 open board meeting, slated for 10 a.m. ET at the agency’s headquarters in Alexandria, Va., will be followed by a closed session addressing creditor claim appeals.
WITH HARPER NOMINATION, NCUA BOARD WOULD BE COMPLETE
The announcement by President Donald Trump late last week of his intent to nominate former congressional staffer and NCUA agency liaison to Congress Todd M. Harper to the second open seat on the governing board of the agency opens the prospect that – for the first time in nearly three years – the agency’s board will have all seats filled. Of course, the two nominees will have to be confirmed by the Senate first. (On Wednesday, the president formally submitted Harper’s nomination to the Senate.)
Harper, if confirmed, would fill a seat reserved for a Democrat on the three-member board, for a six-year term that ends in 2021. The White House announced the president’s “intent to nominate” late in the afternoon Feb. 1. In January, Trump nominated Rodney Hood, a Republican, for a seat on the three-member board (for a six-year term ending in 2023).
Most recently the director of the agency’s Office of Public and Congressional Affairs and chief policy advisor to former NCUA Board Chairman Debbie Matz, Harper earlier was director for the House subcommittee on capital markets, according to an announcement posted by the White House.
The announcement notes that, in his role in the House, “he contributed to the efforts after the financial crisis to enact the Dodd-Frank Wall Street Reform and Consumer Protection Act.” Prior to that, he worked as legislative director for former Rep. Paul E. Kanjorski (D-Pa.), the White House said, during which time he worked on “bipartisan legislation concerning credit union capital rules, terrorism risk insurance, auditing standards, and subprime mortgage lending.”
The seat Harper is nominated to fill has been vacant since Matz left the board in 2016. The second would be filled by Republican nominee Hood, who would take the place of Rick Metsger (a Democrat), who has been serving as a holdover since his term expired in 2017. The third seat is now held by Chairman J. Mark McWatters (a Republican), whose term ends in August of this year.
The Federal Credit Union Act requires that “no more than two Board members can be from the same political party.”
ITO: STATE SYSTEM LOOKS FORWARD TO WORKING WITH NOMINEE
NASCUS President and CEO Lucy Ito issued a statement this week expressing confidence the state credit union system would develop a “productive working relationship” with Harper. “His familiarity with credit unions coupled with his experience staffing the House Financial Service Committee, would bring a unique combination of insights to NCUA,” Ito said. “If confirmed, we are confident that Mr. Harper will work with NCUA Board Chairman McWatters to strengthen the credit union system by easing credit unions’ regulatory burdens and empowering credit unions with the tools necessary to be competitive in the broader market, while, of course, assuring the safety and soundness of federally insured credit unions.”
SENATE BANKING SETS HEARING FEB. 14 ON NOMINEES
Meanwhile, the Senate Banking Committee is tentatively scheduled to hold a hearing on the nominations of both Hood and Harper on Feb. 14 (this coming Thursday), along with several other nominees. Among them: Mark Calabria, nominee to serve as director of the Federal Housing Finance Agency (FHFA).
HOUSE PANEL PLANS HEARING ON MARIJUANA BUSINESS BANKING
Marijuana business banking will be the subject of a subcommittee hearing set for next week, the House Financial Services Committee announced this week. The hearing, before the consumer protection and financial institutions subcommittee, is titled “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses.” It is set for Feb. 13 at 2 p.m. No witness list, or other details, have yet been released by the committee.
Credit union and banking services to legal marijuana businesses have been a flashpoint both for financial institutions and federal regulators, particularly in states that have legalized marijuana use. Federal law, for the most part, still classifies use (and sales) of cannabis products as illegal, regardless of state laws. As a result, financial institutions have been reluctant to serve the businesses without clarification of where federal law stands.
The situation became more complicated (and unclear) last year, when then-Attorney General Jeff Sessions rescinded an Obama Administration policy (transmitted via the “Cole Memo”) that directed federal prosecutors not to target marijuana businesses that operate legally under state law.
NASCUS, as a matter of policy, supports federal legislation that clarifies the permissibility, or non-permissibility, of financial institutions providing financial services to state-authorized cannabis businesses.
FIRST-EVER ‘CANNABIS BANKING’ SYMPOSIUM SET FOR JUNE
As the discussion (and debate) over banking services to legal cannabis businesses takes a more prominent position (such as with next week’s scheduled hearing), NASCUS and the state system are helping credit unions understand and approach the practical issues with a two-day event in June focusing on cannabis banking. The event, the “NASCUS Symposium: State Legalization Of Cannabis And Banking,” is set for June 25-26 in Los Angeles (Universal City). It will offer a variety of sessions turning a bright light on financial institution services for legal cannabis firms. Among the sessions: The business cycle of cannabis: Cultivation, processing, and sale; Cannabis and insurance; Money services businesses (MSBs) cannabis, and compliance; the Role of technology in cannabis compliance; Compliance considerations; Audit checklist and red flags, and much more. See the link below for the complete schedule and registration information.
LATEST LARGE CU TO JOIN STATE SYSTEM: ALLIANT
Another of the nation’s largest credit unions – the eighth in total assets– has signed up for NASCUS membership, primarily to work with state regulators and credit unions across the country. Alliant Credit Union of Chicago (with nearly $11 billion in assets and 450,000 members) is a “giant in the credit union movement,” said NASCUS President and CEO Lucy Ito, noting the cooperative financial institution’s focus on innovation, member care and service. “Alliant’s profound commitment to the state credit union system and to the dual charter framework, makes the organization a perfect fit for NASCUS membership.” Alliant President and CEO David Mooney said the credit union looks forward to leveraging its membership to advance policies and regulations that preserve and protect all credit unions. “NASCUS’ unique membership model will allow us to directly access their network of state regulator members as well as their strong working relationship with federal regulators, to garner insights on regulatory practices and initiatives,” he said.
(Left) A packed house is ready as the program gets underway for the 2019 NASCUS Enterprise Risk Management (ERM) session in Newton, Mass., Thursday. (Right) Attorney David Reed (of Reed & Jolly, PLLC), at left, a presenter at the session, renews acquaintances with Deputy Commissioner of the Massachusetts Division of Banks Jay Bienvenu during a break in the program.
ON THE ROAD: Session gives examiners, practitioners ERM insights
Credit union examiners and practitioners alike participated this week in the NASCUS Enterprise Risk Management (ERM) session in Needham, Mass., where they discussed (and observed) institution-wide risk management programs and identified significant strategic issues that are important for institutions to successfully integrate into their risk management efforts. The discussion helped both examiners and credit union leaders better understand ERM approach, and how to identify weaknesses. The one-day, interactive session covered a variety of topics, including: Credit to transactional: reviewing the seven major risks; Scoring significant risk areas; Basics of “risk based” compliance and examination, and; Developing an ERM approach to the Institution. NASCUS and the Massachusetts Division of Banking (MDB) worked closely together on the program, with the MDB providing staff with professional development training through the program.
TRANSITIONS: New faces in KY, SC
Charlie Riggs is now the division director-depository institutions for the Kentucky Department of Financial Institutions, the agency announced recently. Meanwhile, in South Carolina, Richards H. Green has been named acting commissioner of banking at the State Board of Financial Institutions. He succeeds Robert Davis, who retired from the agency as commissioner last Friday (Feb. 1).
BRIEFLY: Check out our job openings!
NASCUS continues to look for candidates for its open position of the newly created role of vice president of state programs and supervisory policy at the association. Candidates should have bank or credit union examination experience. For details, and to apply, see the link below.