(Dec. 3, 2021) A regulatory alert on Truth in Lending (Regulation Z) annual threshold adjustments for various loans – which take effect Jan. 1 — was issued this week by NCUA, following up on action taken by the CFPB earlier this fall.
The NCUA alert (RA-21-10) notes that the adjustments for credit cards, closed-end home equity loans and qualified mortgages (QMs) are based on the annual percentage change reflected in the Consumer Price Index (CPI) as of June 1, 2021. CFPB is required to calculate the dollar amounts for several provisions in Reg Z each year.
In late October, the bureau increased many, but not all, of the threshold dollar amounts for the loans covered under Reg Z. No change in the $1 threshold triggering minimum interest charge disclosure requirements on open-end consumer credit plans was made, for example.
For open-end credit plans under the CARD Act, there were increases to $30 in the adjusted dollar amount for safe harbor for a first violation penalty fee and to $41 in the threshold for a subsequent violation penalty fee. For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2022 will be $22,969, the agency said; the adjusted points-and-fees dollar trigger will be $1,148.
For QMs, the changes are a bit more complicated, with various thresholds for the spread between the annual percentage rate (APR) and the average prime offer rate (APOR) in 2022. The changes are detailed in the alert.
LINK:
(Dec. 3, 2021) The latest state supervsor to earn reaccreditation from NASCUS is the Texas Credit Union Department, following the series of in-depth reviews and assessments by a panel of veteran state supervisors.
Both Texas Commissioner John J. Kolhoff and NASCUS President and CEO Lucy Ito noted the significance of the certification.
“Reaccreditation demonstrates the value we as examiners and an agency provide to the industry and its members,” said Kolhoff, who also serves as secretary/treasurer of the NASCUS Regulator Board “Our credit union examination department ensures compliance with our laws while following best practices to meet the highest national standards in our supervision of more than $54 billion in assets across 175 credit unions. I am proud of our team for receiving the NASCUS Reaccreditation.”
Ito noted that accreditation is express evidence of an agency’s capabilities, which benefits all credit unions in the state. “This program recognizes the professionalism of a state agency’s regulators, supervisors, and staff while potentially delivering support for state law modernization and policy changes to advance state supervisory processes and best practices,” she said.
To earn the certification, a state supervisory agency must demonstrate it meets accreditation standards in agency administration and finance, personnel and training, examination, supervision, and legislative powers.
NASCUS began developing the program in 1989; it is modeled on the university accreditation concept by applying national performance standards to a state’s credit union regulatory program.
LINK:
(Dec. 3, 2021) Action to “restore meaningful competition” to the overdraft fee market was vowed this week by the CFPB, which noted that both small and large financial institutions “heavily rely” on the fees for revenue.
No details of what that action would be, however, were cited by the agency. However, the agency’s press release stated that CFPB will be “enhancing its supervisory and enforcement scrutiny of banks that are heavily dependent on overdraft fees. “In recent years, the CFPB ordered TD Bank to pay $122 million in penalties and customer restitution, and ordered TCF Bank to pay $30 million in penalties and restitution,” the press release recalled, perhaps as an indication of what the bureau has in mind.
Bureau Director Rohit Chopra criticized financial institutions for their reliance on the fees. “Rather than competing on quality service and attractive interest rates, many banks have become hooked on overdraft fees to feed their profit model,” he said.
The bureau reported on research it conducted that asserted banks continue to “rely heavily” on overdraft and non-sufficient funds (NSF) revenue. The bureau said the total revenue collected from those sources in 2019 was $15.47 billion – 44% of which came from customers for the banks JP Morgan Chase, Wells Fargo and Bank of America. Overall, the bureau said, revenue from the fees made up nearly two out of every three dollars generated in fees at the institutions.
“The CFPB also found that while small institutions with overdraft programs charged lower fees on average, consumer outcomes were similar to those found at larger banks,” the bureau stated. “The research also notes that, despite a drop in fees collected, many of the fee harvesting practices persisted during the COVID-19 pandemic.”
Additionally, the agency said, its research shows that aggregate overdraft and NSF fee revenues reported in Call Reports for banks with assets of more than $1 billion saw a small but steady annual increase of around 1.7% per year to $11.97 billion in 2019.
“Reliance on such fees varied considerably among institutions in the Call Reports, but was generally stable over time for any given institution,” the bureau said. “While aggregate overdraft and NSF fee revenues declined by 26.2% in 2020, increased checking account balances resulting from federal stimulus payments likely contributed to this decline.”
LINK
CFPB Research Shows Banks’ Deep Dependence on Overdraft Fees
(Dec. 3, 2021) Mountain West Credit Union Association President and CEO Scott Earl announced his retirement this week, saying he will step down at the end of June next year. He has been leader of the association, which represents Arizona, Colorado and Wyoming, since 2011 … While inflation is expected to ease off, a chance of persistently high inflation could lead Federal Reserve policymakers to increase interest rates, placing credit unions in the position of paying closer attention to interest-rate risk, NCUA Board Chairman Todd Harper said this week. Speaking to state association/league leaders via a remote broadcast, Harper said that – although the yield curve is expected to steepen — a flat yield curve would put downward pressure on credit union net interest margins. “The ability to manage interest rate risk will remain a crucial determinant of credit union performance going forward,” Harper said. “To remain on a sound footing, credit unions will also need to continue to pay careful attention to capital, asset quality, earnings, and liquidity” … New debt collection rules adopted by CFPB earlier this year went into effect this week, the agency noted in a blog entry, laying out key points to know about the regulation. According to bureau, the new rules clarify how debt collectors can communicate with borrowers, including what information they’re required to provide at the outset of collection about the debt. The agency said the rules also outline rights of borrowers in debt collection, and how they can exercise those rights … Don’t forget next week’s (Dec. 9 at 2 p.m. ET) NASCUS 101 — a free, short webinar where participants learn from the NASCUS team how to make the most of an association membership. Among the topics addressed: What NASCUS is, how NASCUS contributes to the entire credit union industry, how to engage in the regulatory and legislative processes, collaboration with peers, committee and working group involvement, customized communications and more. The webinar is open to all members and prospective members. While it is free to participate, registration is required … Welcome to NASCUS membership Michigan State University Federal Credit Union of East Lansing; led by president & CEO April Clobes; the credit union holds $6.5 billion in assets.
LINK:
Understand how the CFPB’s Debt Collection Rule impacts you
Register here for NASCUS 101, Dec. 9, 2 p.m. ET.
(Dec. 3, 2021) One new section – focusing on assessments of money laundering practices — and updates to three existing parts of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual were released this week by the FFIEC.
The manual provides instructions to examiners for assessing an institution’s BSA/AML compliance program and its compliance with BSA regulatory requirements. The changes released this week include the new section focusing on how credit unions and other financial institutions assess money laundering and terrorist financing risks (if any) posed by their customers.
The other updates revise the manual’s current sections on charities and nonprofit organizations; independent automated teller machine (ATM) owners or operators; and politically exposed persons.
The exam council said examiners are reminded that no specific customer type automatically presents a higher risk of money laundering, terrorist financing, or other illicit financial activity. “Further,” the council noted, “banks that operate in compliance with applicable BSA/AML requirements and reasonably manage and mitigate risks related to the unique characteristics of customer relationships are neither prohibited nor discouraged from providing accounts or services to any specific class or type of customer.”
Additionally, the exam council said the updates should not be seen as new requirements or suggest a new or increased focus on certain areas. “Rather, these sections provide information and considerations related to certain customers that may indicate the need for bank policies, procedures, and processes to address potential money laundering, terrorist financing, and other illicit financial activity risks,” the council noted. “These sections provide further transparency into the BSA/AML examination process.”
LINK:
Federal and State Regulators Release Updates to the BSA/AML Examination Manual
(Dec. 3, 2021) Fees – both mandatory and maximum allowable — are on the increase for 2022 under actions taken this week by the CFPB and the Federal Reserve.
A 50-cent increase in the maximum allowable fee that a nationwide consumer reporting agency or nationwide specialty consumer reporting agency can charge consumers for their credit reports will raise next year’s fee maximum to $13.50, according to CFPB.
The Fair Credit Reporting Act (FCRA) requires that a nationwide consumer reporting agency provide one file disclosure to a consumer, upon request, every 12 months; it provides for other no-cost disclosures under certain circumstances, the bureau noted. Where a fee is permitted, however, and under the recent adjustment, it may not be greater than $13.50, according to the CFPB’s notice in Monday’s Federal Register.
Also this week: the Federal Reserve announced its priced services fees will increase an average 3.7% in the new year. The Fed said increases in the fee schedule for 2022 are generally like previous years, except 2021 where fees other than the Check Services Participation Fee remained flat.
The priced services are categorized within check services, FedACH, Fedwire® Funds and NSS, and Fedwire Securities, the agency said. The 2022 fee schedule for each of the priced services is available on the Federal Reserve Banks’ financial services website at FRBservices.org®. Specific fee changes are detailed more fully in the Fed’s draft notice for the Federal Register, which also details the Fed-approved $19.4 million “private sector adjustment factor” (PSAF) for 2022.
LINKS
Federal Register notice on consumer credit report fees
Federal Reserve Board approves fee schedule for Federal Reserve Bank priced services
(Dec. 3, 2021) Congress should make permanent temporary enhancements to the fund that backs up credit union liquidity, which were made in response to the coronavirus crisis, the three members of the NCUA Board wrote this week.
However, if the changes cannot be made permanent, the board members allowed, Congress should consider at least a one-year extension.
The joint letter to Congress, signed by all three members of the NCUA Board, asked that the enhancements to the agency’s Central Liquidity Fund (CLF) be made permanent. The temporary changes were made via the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020.
Although those changes have been extended once already – in the Consolidated Appropriations Act of 2021 (which became effective in December 2020) – the changes are scheduled to expire on Dec. 31, according to the NCUA Board members’ letter. The letter indicated that by not making the changes permanent, thousands of credit unions could lose access to the liquidity facility. (The CLF, owned by credit unions and managed by NCUA, is a back-up source of liquidity for credit unions, like the way the Federal Reserve’s discount window provides access to loans for eligible banks and other financial institutions.)
As of October 2021, 4,107 credit unions or 82% of all federally insured credit unions have access to the CLF, up from 283 as of April 2020, the letter states. “The growth in the number of CLF members is a testament to our nation’s credit unions coming together in a time of crisis to strengthen the national system of cooperative credit.”
LINK:
NCUA Board Calls on Congress to Make CLF Enhancements Permanent
(Dec. 3, 2021) CFPB’s inquiry into “big tech” payment platforms is the topic of the latest summary to be published by NASCUS, just this week. Like all summaries, it is available to members only.
In October, the bureau issued a request for comments (due on Monday, Dec. 6) into the business practices of six large technology firms operating payments systems in the United States. In issuing the comment request, the bureau said it wants to better understand how the firms use personal payments data and manage data access to users so the bureau can ensure adequate consumer protection.
On Oct. 21, the bureau had announced it had ordered the six tech firms – Google, Apple, Facebook, Amazon, Square, and PayPal – to provide information about their payments-related products, plans and practices in the period from Jan. 1, 2019, through Sept. 30, 2021. The bureau said it will also study the practices of the Chinese tech giants that offer payments services, such as WeChat Pay and Alipay.
CFPB Director Chopra, in a statement Oct. 21, said the inquiry will help inform regulators and policymakers about the future of the payments system. “Importantly, it will also yield insights that may help the CFPB to implement other statutory responsibilities, including any potential rulemaking under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act,” he said. Section 1033 addresses consumer access to financial records.
Dec. 15 is the deadline for the six tech firms to respond to the orders, according to an “example” of the order the agency provided with its Oct. 21 announcement.
LINK: