(June 18, 2021) Collection, reporting, and public disclosure of data concerning credit applications made by women-owned, minority-owned, and small businesses will be the subject of a proposed rule by the CFPB later this summer, according to the agency’s spring 2021 agenda, published late last week.
This proposal and others to come are reviewed in a blog post by the bureau published on the agency’s website about its regulatory agenda, which is part of the “unified agenda” of rules across federal agencies and departments (including NCUA).
The small-business data proposal is planned for release in September, according to the agenda, and follows the outline of proposals issued about a year ago and a stakeholder panel report in December. The proposed rule would implement a section 1071 requirement in the Dodd-Frank Act requirement.
The blog post also hints that the bureau’s permanent director (nominee Rohit Chopra, who now sits on of the Federal Trade Commission) will be confirmed by the Senate in the coming months; it states that the permanent director’s changes to the current agenda will be reflected in the fall 2021 agenda.
Other rules ahead for the CFPB, according to the regulatory agenda, include:
- action on rulemaking over availability of consumer financial account data (the bureau is considering comments it has already received and assessing “next steps”).
- A final rule intended to facilitate the transition away from the LIBOR reference rate, which becomes defunct for new contracts in January. The bureau said it intends to release its final rule that same month. “Our work is designed to lessen the financial impact to consumers and facilitate creditor compliance by providing examples of replacement indices that meet Regulation Z requirements,” the bureau wrote in the blog post.
- Assessments of a rule implementing HMDA, which became effective in 2018. The bureau noted that, considering other rulemaking priorities, it is no longer pursuing two HMDA rulemakings that were listed in the proposed rule stage in previous agendas – one addressing the data points that lenders must report and another related to the public disclosure of HMDA data.
LINKS:
Unified Agenda – CFPB spring 2021 list
CFPB Spring 2021 Rulemaking Agenda
(June 18, 2021) The designation of a federal holiday to mark Juneteenth – the commemoration of the emancipation of enslaved people in the United States – is both a time for celebration and a cause for somber reflection, said NASCUS President and CEO Lucy Ito in a statement issued by NASCUS this week.
On Thursday, President Joe Biden (D) signed into law a measure marking Juneteenth as a federal holiday. Ito issued her statement in keeping with the association’s commitment made a year ago in the wake of the death of George Floyd that NASCUS believes that Black lives matter and NASCUS and the state system are committed to fostering an environment free of racism where everyone is seen, heard and respected.
“Juneteenth is a time to celebrate the word of freedom reaching the enslaved in Texas in late 1865 and the end of lawful slavery in the country,” Ito said. “It is a time for somber reflection on the fact that too many have had to wait for the freedom and individual dignity upon which our nation was founded to apply to them. The civil unrest and social justice movements of today are a reminder that for many, the wait for true equality and opportunity continues.
“NASCUS deeply values the diverse experiences and voices of our staff, leadership, and members. But we fully appreciate that this is not enough. As we reflect on this Juneteenth, we at NASCUS recommit ourselves to the ideals of equality and respect to which we, as a society, should aspire. And we celebrate Juneteenth and its overdue nationwide recognition as an essential thread in our national fabric.”
(June 18, 2021) Two state credit union CEOS have been named to the NASCUS Credit Union Advisory Council by Council Chairman Mike Williams, one completing a three-year term of a retired member of the group, and the second to a one-year term on the panel. Amy Nelson, president and CEO of PointWest Credit Union in Portland, Oregon, was named to complete the three-year term of former council member Patty Idol, who retired from Mountain CU in Waynesville, N.C. Meanwhile, Amy Sink of Interra Credit Union in Goshen, Ind., was named to the one-year appointment, succeeding Jeff Dahlstrom of Southeast Financial CU in Nashville. Dahlstrom remains on the council: he agreed to complete the unfinished three-year term held by Jason Boeasch, who recently became CEO of Kay Electric Cooperative in Blackwell, Okla. Congratulations to both Amys, and Jeff – and thanks for your service.
(June 18, 2021)Manuel P. (“Manny”) Alvarez, commissioner of the California Department of Financial Protection and Innovation (since March 2019) is stepping down today. According to press reports, he wants to “turn his attention to other areas.” The office of Gov. Gavin Newsom (D) said Chief Deputy Commissioner Chris Shultz – who supervises the agency’s business operations – will be named acting commissioner … Meanwhile, congratulations to Ben Young, the new CEO of Norristown Bell CU in Blue Bell, Pa.; he replaces long-time CEO Helen Edwards, who is retiring. Helen was very active in NASCUS policy positions, and an ardent supporter of the state system.
(June 18, 2021) Two final rules – on mitigating the impact of the new CECL accounting standard, and allowing credit unions to capitalize interest, which NASCUS urged be finalized “expeditiously” earlier this year – are on the agenda for the NCUA Board when it meets next week.
The proposal on capitalizing interest was issued in November by the NCUA Board and would remove a prohibition on interest capitalization. Then, the board suggested, that continuing to prohibit the authorization of additional advances to finance unpaid interest may be overly burdensome. Removing the prohibition, the board asserted, would “assist a federally insured credit union’s good-faith efforts to engage in loan workouts with borrowers facing difficulty because of the economic disruption that the COVID- 19 event has caused.”
In its comment letter filed in February, NASCUS agreed, writing that finalizing the proposal would provide credit unions’ greater flexibility to work with economically distressed members (including those affected by the coronavirus crisis). “That enhanced flexibility benefits distressed credit union borrowers by expanding the options for repayment programs as the member regains their economic footing,” NASCUS wrote.
The state system also urged the board to act expeditiously in finalizing the proposal. “We have no doubt credit unions will exercise the ability to capitalize interest to the benefit of members in need and are confident in the ability of state examiners to provide supervisory oversight of loan workouts and modifications,” NASCUS wrote.
Also on the board’s agenda for next week’s meeting: finalizing a rule mitigating the day-one effect of the current expected credit loss (CECL) accounting standard on capital levels at credit unions. The new standard takes effect for most credit unions in January 2023.
Under the proposal, a phase-in period of three years would be established for the day-one adverse effects on credit unions’ regulatory capital under the CECL accounting standard. However, smaller credit unions (those with $10 million or less in assets) would be exempted from having to use the standard to figure loan loss reserves.
NASCUS, in its comment letter filed last October, supported the proposal, but also offered some suggested changes, including that credit unions that reach $10 million in assets after Jan. 1, 2023 should be afforded the opportunity of a three-year phase in of the day-one effect. Credit unions larger than that, NASCUS wrote, should have the option of recognizing the full day-one effect of CECL immediately. NASCUS also urged NCUA to consider how CECL will be incorporated into stress-testing requirements after implementation.
The meeting is set for 10 a.m. on Thursday; audio of the session will be streamed live, via the Internet.
LINKS:
NCUA Board Agenda for the June 24, 2021 Meeting
NASCUS Comments on Transition to the Current Expected Credit Loss Methodology
(June 18, 2021) 2020 mortgage lending transactions at 4,475 U.S. financial institutions reported under HMDA are now available, the FFIEC said Thursday. Covered institutions include credit unions, banks, savings associations and mortgage companies … The reserve ratio for the insurance fund of bank deposits dropped to 1.25% in the first quarter, the FDIC Board was told this week. However, the board decided to stay the course on its “fund restoration plan” to bring the Deposit Insurance Fund (DIF) back up to a ratio of 1.35% over the next eight years. Along that line: the board decided not to make any changes to bank assessment rates (at least for now).
LINKS:
FFIEC Announces Availability of 2020 Data on Mortgage Lending
FDIC restoration plan semiannual update
(June 18, 2021) Military Lending Act-related examinations will now resume by the CFPB, the agency said this week, asserting that the prior administration’s reasoning for discontinuing the reviews were not found persuasive.
In a release, the bureau said it has issued an interpretive rule explaining the basis for its authority to examine supervised financial institutions for risks to active duty servicemembers and dependents from conduct that violates the MLA. (The MLA, enacted in 2006, and implemented by the Department of Defense, applies to consumer credit offered to military service members and their dependents by, among other things, limiting the interest rates that may be charged on many types of consumer loans to no more than 36%.)
CFPB Acting Director Dave Uejio, in a statement, said through the bureau’s enforcement of the MLA, companies that harmed military borrowers have been ordered to pay millions of dollars in redress and civil penalties. “To fulfill its purpose and protect military borrowers we must supervise financial institutions and hold them accountable for endangering consumers,” Uejio said.
The agency noted in its release that in September 2013, it amended its supervisory procedures so examiners could review lenders’ records about MLA violations. Pointedly, the agency stated that for five years no companies disputed the bureau’s authority to review their MLA lending practices.
“In 2018, the CFPB’s leadership discontinued MLA-related examination activities, based on its stated belief that Congress did not specifically confer examination authority on the CFPB with respect to the MLA,” the bureau release stated. “The current CFPB leadership does not find those prior beliefs persuasive and the CFPB will now resume MLA-related examination activities,” the release concluded.
The summary for the interpretive rule (which becomes effective when it is published in the Federal Register) states outright that the bureau has “statutory authority to conduct examinations, at those institutions that it supervises, regarding the risks to active-duty servicemembers and their covered dependents that are presented by conduct that violates the Military Lending Act.”
“This interpretive rule explains the basis for that authority,” it states.
The CFPB’s interpretive rule also notes that the Consumer Financial Protection Act (CFPA) authorizes the bureau to conduct examinations of very large banks and credit unions for purposes of detecting and assessing “risks to consumers”that are associated with activities subject to federal consumer financial laws, such as the Truth in Lending Act (TILA) or the CFPA. The rule asserts that the activity of extending consumer credit under the MLA is a subset of the activity of extending consumer credit under TILA by the large credit unions and banks.
The bureau said it recognized the role of the prudential regulators in conducting MLA supervision, including examinations, at very large banks and credit unions. However, it also asserted that exams conducted by CFPB for MLA compliance are for a different purpose.
“Nothing in the CFPA or in this interpretive rule limits in any way, or should be deemed to limit in any way, the prudential regulators’ consumer compliance examinations of very large banks or credit unions, or their subsidiaries, for the purpose of assessing compliance with the MLA,” the rule states.
(June 18, 2021) Just a reminder that the first NASCUS 101 for 2021 – the popular series of webinars that explains how NASCUS members can get the most out of their memberships – is coming up next week (Wednesday, June 24). Registrations are still being taken. The series covers the many ways NASCUS members can reap the most of their memberships, in just 30 minutes, with a concise, but detailed, overview touching on NASCUS legislative and regulatory (L&R) resources, educational offerings and webinars, member engagement, as well as news and data.
The bi-monthly series — free and open to all NASCUS members — illustrates how collaboration among all 45 regulatory agency members, committees, credit unions, leagues, corporates, trade associations, and CUSOs can support the credit union system.
In addition to next week’s session, NASCUS 101 is also scheduled for Aug. 12, Oct. 14 and Dec. 9. See the link below for more details, including registration.
LINK:
NASCUS 101 (via the NASCUS Member Portal)
(June 18, 2021) Other new and proposed rules that should be coming up for action soon by the NCUA Board were also outlined in the spring 2021 regulatory agenda published recently by the agency (via the White House Office of Management and Budget (OMB)). Those include:
- A proposed rule to integrate an NCUA equivalent (the Complex Credit Union Leverage Ratio, CCULR) to the community bank leverage ratio (CBLR) into NCUA’s capital standards, perhaps as soon as next month. The CCULR is modeled on the bank ratio adopted by federal banking agencies in 2019, which removes requirements for calculating and reporting risk-based capital ratios for most banks with less than $10 billion in assets, more than 9% in risk-based capital, and that meet certain risk-based qualifying criteria. Banks meeting the criteria can “opt-in” to use the CBLR. NASCUS, in a comment letter last month, said the state system supported further development of the CCULR, noting that it would allow both the 2015 risk-based capital and subordinated debt rules to take effect.
- A final rule (as soon as September) updating the CAMEL exam rating system, including adding an “S” (for “sensitivity to market risk”). NASCUS filed comments on the proposal in early May, urging the agency to move “expeditiously” on adding the S component, which, NASCUS wrote, would better align NCUA with state credit union and federal banking regulators that have already made the move.
- A final rule (perhaps by the end of this summer) expanding CUSO lending activities. In its comment letter in March, NASCUS noted possible, additional reporting requirements for state credit unions if the proposal were made final. In some states, NASCUS pointed out, CUSOs owned by state credit unions already hold expanded lending power. The association noted, however, that the NCUA proposal could end up requiring additional reporting requirements that don’t today exist for SCUs. “NASCUS opposes extension of any additional reporting requirements to SCU CUSOs resulting from an expansion of FCU powers,” the association wrote.
- Revision of regulation prohibiting a federally insured credit union (FICU) from making golden parachute and indemnification payments to an institution-affiliated party under certain circumstances. According to the rule list, the proposed rule would improve the organization and clarity of the regulation and would include a section on merger-related financial arrangements. It also would amend the regulation to assist FICUs in the identification and processing of golden parachute payments. The proposal is scheduled by October or later.