THIS WEEK: States offer thumbs up on appraisal proposal; CFPB outlines ‘common sense’ abusive acts definition; Bureau updates reporting agency list; Agency names enforcement official; Comments due March 30 on bank acquisition proposal; StateFocus offers monthly view of states; BRIEFLY: Fed nominees; new Fed term starts; NCUA Board sets Feb. 6 closed meeting
State system OK with raising appraisal threshold
A proposal to increase the threshold level to $400,000 below which licensed or certified appraisals would be required has won the support of the state system in a comment letter – with a recommendation to consider an even higher level.
NASCUS wrote to NCUA that its proposal to raise the appraisal threshold “balances safety and soundness, consumer protections, and the ability of borrowers and lenders to close transactions in an efficient and cost-effective manner, while establishing a threshold appropriate for today’s residential real estate market.”
NCUA’s proposal, issued Nov. 21, raised the mandatory appraisal threshold from $250,000 to $400,000. Under the proposal, federally insured credit unions (FICUs) would be required to obtain written estimates of the market value of the real estate collateral that is consistent with safe and sound banking practices in lieu of an appraisal for loans under the appraisal threshold.
While NASCUS supported the proposal threshold, it also suggested raising it to $500,000. “NASCUS would support an even higher threshold and believes there is merit to considering $500,000 as a threshold,” the association wrote.
NASCUS also told the agency that raising the threshold:
- Would not compromise safety and soundness (noting that the experience of state supervisors and credit union historical performance demonstrates credit unions can manage a higher appraisal threshold, as shown by NCUA analysis, and written estimations of market value mitigate risk that the underlying collateral doesn’t support the loan).
- Does not adversely affect consumer protection (in that valuations can protect consumers by ensuring the value of the property is commensurate to the loan amount, and that NCUA is required to receive concurrence from the CFPB that the threshold provides “reasonable protection” for consumers.
- Might result in a benefit to consumers (pointing out that “in some cases, the flexibility for a credit union to use an alternative valuation method may save the borrower hundreds of dollars compared to the cost of obtaining an appraisal.”
CFPB details ‘common sense’ prohibition on abusive acts
Holding out the possibility of a future rulemaking, CFPB late last week announced what it described as a “common-sense” framework on how it plans to apply the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank) prohibition on abusive acts or practices.
The new policy, which went into effect late last week, notes that Dodd-Frank is the first federal statute to broadly prohibit “abusive” acts or practices in connection with the provision of consumer financial products or services. It says the new policy attempts to provide clarity.
“Through this policy statement, the Bureau is providing clarification on how it intends to apply abusiveness in order to promote compliance and certainty,” it said in the announcement.
- “Commencing immediately,” the bureau said, it intends to apply the following principles during supervision and enforcement work:
- focus on citing or challenging conduct as abusive in supervision and enforcement matters only when the harm to consumers outweighs the benefit;
- generally avoid “dual pleading” of abusiveness and unfairness or deception violations arising from all or nearly all the same facts, and alleging “stand alone” abusiveness violations that demonstrate clearly the nexus between cited facts and the bureau’s legal analysis;
- seek monetary relief for abusiveness only when there has been a lack of a good-faith effort to comply with the law, except the bureau will continue to seek restitution for injured consumers regardless of whether a company acted in good faith or bad faith.
The policy statement notes that during a symposium the bureau held last year on the abusiveness standard, most (but not all) participants expressed a need for more clarity to aid compliance. It says that in issuing the statement, the bureau “does not foreclose the possibility of engaging in a future rulemaking to further define the abusiveness standard.”
The policy does not address the Dodd-Frank prohibitions of unfair or deceptive acts, which, the bureau notes, have been addressed through policy statements, administrative and judicial precedent, and “statutory amendments over 80 years under the Federal Trade Commission Act.”
Bureau updates list of consumer reporting agencies
An updated list of consumer reporting companies was published this week by the CFPB, which the agency said can be filtered and searched online. “You know your credit report is important, but the three nationwide consumer reporting companies—Equifax, TransUnion, and Experian—aren’t the only companies that collect information on you,” the bureau said in unveiling its new guide. “Other companies collect information and prepare consumer reports about you—and you have a right to see those reports. This list of consumer reporting companies gives you the details you need to take action.”
The bureau said its updated list for 2020 includes features such as:
- Information consumers need to request a report from a reporting agency.
- Tips on what specialty reports may important for fact-checking a consumer’s credit report.
- Identity verification information used by consumer reporting companies to confirm the identity of a consumer seeking a report.
- Guide to free reports (listing the companies that provide a free report at least once a year).
- Reporting companies that provide free scores.
- How a consumer may request a security freeze on their information.
Consumer agency names enforcement official – and others
A former Washington attorney and Justice Department civil division assistant attorney general has joined the CFPB as assistant director of enforcement in the bureau’s supervision, enforcement and fair lending division. The agency said Thomas G. Ward has experience in financial and securities litigation and investigations. The bureau also announced several other non-supervisory appointments, including: Susan M. Bernard as assistant director for regulations in the research, markets and regulation division; Donna Roy as chief information officer in the operations division; Rachelle Vaughan as chief procurement officer in the operations division; David Wernecke as chief experience officer (no additional explanation was given for that position).
Comments due March 30 on bank acquisition proposal
The comment period for NCUA’s proposed rule on “combination transactions” (otherwise known as credit union acquisition of bank assets, or vice versa) began Thursday and runs for 60 days – to March 30. The proposal was published yesterday in the Federal Register.
Under the proposal (which would add a subpart D to part 708a of NCUA regulations), procedures and requirements currently in place related to the so-called “combination transactions” would be clarified and be made transparent, according to NCUA. The agency noted in its Register notice that such transactions include those where “a federally insured credit union (FICU) proposes to assume liabilities from a non-credit union, including a bank.” The transactions also include a FICU’s merger or consolidation with a non-credit union entity.
The proposal, which was issued by the NCUA Board last week, also clarifies, NCUA said, the scope of its regulations which now require the NCUA to grant approval before an FICU may purchase loans or assume an assignment of deposits, shares, or liabilities from any institution that is not insured by the National Credit Union Share Insurance Fund (NCUSIF).
Related to that (and also this week), a bankers’ group in Washington sent letters to Senate and House committees requesting hearings. The Independent Community Bankers of America (ICBA) said “the surge” of credit union purchases of community banks justifies the hearings.
Meanwhile, the proposal on subordinated debt has not yet been published in the Register (and thus the comments-due date has not yet been set). The board voted last week to issue it with a 120-day comment period.
New, monthly publication offers latest on state actions
Action in the states – including recent legislative and regulatory developments, as well as other issues of interest in the states to the credit union system – are the subject of the newest NASCUS publication, StateFocus.
The monthly publication — for members only — was first published this week and distributed to all NASCUS members (including regulators, credit unions and associates). StateFocus will be published during the final week of each month.
This week’s first issue featured: the new department of financial protection and innovation in California; the advent of public deposits for New York credit unions; the status of cyber legislation in Ohio; “super parity” effective in Washington, and; prize-linked savings debuting in Hawaii and Utah.
For more information, including to subscribe, NASCUS members should contact NASCUS Vice President of Communications Shelton Roulhac.
BRIEFLY: Nominees for Fed Board formally transmitted to Senate … as another takes oath for another term; NCUA Board sets closed meeting Feb. 6
Filling the two opens seats on the Federal Reserve Board moved forward, incrementally at least, this week when the White House formally transmitted the names of nominees to the Senate for consideration. Judy Shelton and Christopher Waller, whose names were sent to the Senate, were tapped for the two open slots on the Federal Reserve Board by President Donald Trump on Jan. 16. Shelton is a former executive director of the European Bank for Reconstruction and Development. She has also described herself as a “self-employed economist.” Waller is an economist and executive vice president and director of research at the Federal Reserve Bank of St. Louis. The Senate Banking Committee has not yet scheduled confirmation hearings for either (although reports late this week mentioned Feb. 13 as a possibility) … Meanwhile, also this week, Michelle W. (“Miki”) Bowman took the oath for a second term on the Federal Reserve Board Thursday –the day before her current term expired. Bowman – sworn in by Federal Reserve Board Chair Jerome H. (“Jay”) Powell – was reconfirmed by the Senate Sept. 12 for a 14-year term that ends Jan. 31, 2034. She first took office Nov. 26, 2018 to fill an unexpired term ending Friday (Jan. 31, 2020) … A closed meeting to discuss a “supervisory matter” has been scheduled by the NCUA Board for Feb. 6. The agency, in a release, provided no other details. However, in declaring a closed meeting, the agency cited exemptions to open meeting regulations related to examination, operating or condition reports of a credit union.
For more information about NASCUS publications, or to obtain permission to reprint a NASCUS publication, please contact NASCUS' Communications Department.