(Oct. 15, 2021) The CFPB has a new, permanent director (for a five-year term, at least – or until the president decides to make a change), who this week also installed a new, senior staff full of former bureau workers.
Rohit Chopra was sworn in Tuesday as the latest leader of the bureau, becoming the fifth permanent or acting director since the agency’s creation in 2011. He was confirmed by the Senate Sept. 30 for the job. In a letter to all agency employees (as well as the boards of the Federal Reserve and FDIC (on whose board he sits as CFPB director)), Chopra said the agency and its workers must use their tools to promote competition and shift market power toward consumers and law-abiding businesses.
“We must strive for a marketplace where families are treated fairly and can seek help when they’re in trouble,” Chopra wrote. “And most importantly, we must anticipate emerging risks so we can act before a crisis, rather than acting after it is too late.”
The next day, Chopra announced he was naming four individuals to serve in senior posts — deputy director, associate director for consumer education and external affairs, chief of staff, and chief technologist – three of whom previously served at the agency. They (and their latest positions) are: Zixta Q. Martinez, as deputy director; Jan Singelmann as chief of staff; and Erie Meyer as chief technologist.
Karen Andre, who most recently was President Biden’s special assistant for economic agency personnel, was named associate director for consumer education and external affairs.
LINK:
Chopra letter: The CFPB is looking out for families, workers, and communities
CFPB Names Key Senior Positions
(Oct. 15, 2021) It’s “time to move” from LIBOR now by slowing the use of the reference rate by year’s end to foster a smooth completion of the rate’s overall use, according to a Federal Reserve-sponsored group that has developed an alternative rate.
LIBOR – the London Interbank Offered Rate – is used widely in derivative contracts, and other financial vehicles, as a reference rate. It is also used by many financial institutions as a reference rate for adjustable rate mortgages and student loans (particularly among credit unions).
However, the rate is being discontinued for new contracts after Dec. 31 (and completely defunct for existing contracts after June 30, 2023). “As a result, USD LIBOR’s liquidity and usefulness will likely diminish as new use comes to an end,” the Alternative Reference Rate Committee (ARRC) stated in a press release this week.
NCUA and the federal banking agencies have issued supervisory guidance to credit unions and banks reminding them that LIBOR will be discontinued after year’s end, and that the institutions should take steps to find alternative rates. ARRC said its recommendation is consistent with steps that “it understands a number of firms are already taking to significantly slow new USD LIBOR activity ahead of year-end in order to ensure that they will be in a position to meet the supervisory guidance.”
ARRC has recommended, as an alternative, the Secured Overnight Financing Rate (SOFR), which the group helped to develop. The Federal Reserve has recommended that firms switch to SOFR for such items as derivative contracts but has made no such recommendation for specific use of SOFR for loans (NCUA and the other banking agencies have likewise made no specific recommendation).
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(Oct. 15, 2021) Credit unions with both minority depository institution (MDI) and low-income (LICU) designations may apply now, through Oct. 29, for NCUA’s mentoring grants worth a total of $100,000, the agency said this week.
NCUA said the grant round is aimed at supporting mentoring relationships with larger, experienced credit unions to provide guidance to the other MDIs.
Eligibility and administrative requirements information is available on the agency’s website. However, NCUA said, credit unions must use its “CyberGrants portal” to submit applications.
The agency first announced the mentoring grant round last month.
LINK:
NCUA MDI Mentoring Grant Round Reopens Oct. 11
(Oct. 15, 2021) Finalizing a proposed – and contentious — rule on expanded lending and services provided by federal credit union (FCU) credit union service organizations (CUSOs) highlights the scheduled agenda for next week’s meeting of the NCUA Board.
In other action, the board will consider finalizing a rule that would add an “S” (Sensitivity to Market Risk) component to the existing CAMEL rating system and redefine the “L” (Liquidity Risk) component, thus updating the rating system from CAMEL to CAMELS.
The CUSO rule was proposed at the beginning of the year. It would deem as permissible for CUSOs the origination of any type of loan that an FCU may originate; and grant the NCUA Board additional flexibility to approve permissible CUSO activities and services. The agency also sought comments on broadening FCUs’ authority to invest in CUSOs.
But, from the beginning, the proposal has been controversial. It was released Jan. 14 on a 2-1 vote of the NCUA Board, with then-Board Member (now Chairman) Todd Harper dissenting. Harper, making his objection, noted the NCUA’s lack of direct supervisory authority over CUSOs and indicated the proposal raised potential consumer protection concerns. He said such a rule “will create a Wild West within the credit union space,” affording “little accountability for consumer protection” as CUSOs could exceed the restrictions applied to FCU lending in areas such as interest rate, loan term, and repayment.
Shortly after that board meeting, Harper was named chairman of the three-member board by the newly inaugurated President Joe Biden (D). He replaced current Board Member Rodney Hood in the position.
Since then, the proposal stalled. It was originally issued with a March 29 comment deadline (about 60 days after its proposal). The agency then extended the comment period another 30 days.
Last month, the board agreed to consider finalizing the rule (along with two other outstanding proposals) in upcoming board meetings over three months; the CUSO rule was the first on the list. However, controversy again dogged the proposed CUSO rule, as it (and the other two rules, to be considered in November and December) were approved for future, final consideration on a vote of 2-1, with Harper again dissenting. In doing so, he reiterated his concerns about the potential of the proposed CUSO rule for growing an “already unregulated space within the credit union system, with little accountability for protecting consumers and credit unions.”
In its comment filed on the proposal (on April 30), NASCUS noted as a key concern with the proposal that possible, additional reporting requirements for state credit unions could be a result of a finalized rule. NASCUS noted that the proposal could influence state credit unions considering collaborating with FCU investors in the formation and ownership of a CUSO, — which prompted the association to comment.
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.
The CAMELS proposal was put forth in January (the same meeting at which the CUSO proposal was issued) and was approved for public comment on a unanimous vote by the board. The proposal would bring the NCUA’s rating system up to date with a change that banking regulators incorporated decades ago and satisfy a recommendation the agency’s inspector general has been recommending for about the past five years.
Nearly five years ago, NASCUS wrote to NCUA urging the change and adding the “S” component. “NASCUS and state supervisory agencies encourage NCUA to consider earlier adoption of ‘CAMELS,’” NASCUS’ Lucy Ito wrote in the June 2016 letter to the board. “We again note that the separation of the ‘S’ component does not require a credit union to develop additional management system enhancements where market risk is already appropriately identified, measured, monitored and managed as part of the ‘L’ component.”
She also noted that in states that have adopted CAMELS (now totaling 24 – up from 16 when she wrote the letter), that regulators and credit unions have reported positive outcomes with nearly no additional regulatory burden.
In its comment letter filed last spring, NASCUS wrote that moving expeditiously on adding a “market risk sensitivity” component to the credit union examination system – that is, adding an “S” to “CAMEL” – would better align NCUA with state credit union and federal banking regulators that have already made the move. However, NASCUS added, there is no need to “reinvent the wheel and develop a credit union CAMELS Rating System that diverges from the established CAMELS system currently in use in bank supervision and in the states that have adopted CAMELS for credit union supervision.” NCUA has proposed definitions and components of the criteria to be used in assigning the “S” and “L” ratings.
Also on the agenda for Thursday’s meeting is a board briefing on cybersecurity. The NCUA Board meeting is scheduled to get underway at 10 a.m., and to be live-streamed via the Internet.
LINKS:
Board Agenda for the October 21, 2021 Meeting
NASCUS comment: Notice of Proposed Rulemaking Regarding CAMELS Rating System
NASCUS comment: Proposed Rule, Credit Union Service Organizations (CUSOs) – RIN 3133–AE95
(Oct. 15, 2021) Describing a new set of tools it has developed to promote digital safety as a “holistic cybersecurity resource” for credit unions, NCUA has scheduled an Oct. 28 webinar on the tool kit, the agency said this week.
The 60-minute webinar will cover the agency’s “Automated Cybersecurity Evaluation Toolbox (ACET),” and features participation by agency Board Chairman Harper. The event is scheduled to get underway at 3 p.m. ET.
According to the agency, the ACET is a downloadable self-contained application, developed for credit unions by the agency, which guides credit unions through the ACET “Maturity Assessment.” NCUA said that component is aligned with the FFIEC’s Cybersecurity Assessment Tool (CAT). The maturity assessment, the agency said, allows credit unions of all sizes to determine and measure their own cybersecurity preparedness over time.
The ACET also contains, NCUA said, several other types of industry recognized cybersecurity best practices and standards, including the “Ransomware Readiness Assessment (RRA)” from the federal government’s Cybersecurity & Infrastructure Security Agency (CISA). According to NCUA, the RRA is a “self-assessment based on a tiered set of practices to help organizations better assess how well they are equipped to defend and recover from a ransomware incident.”
The webinar will include a question-and-answer session with participants. Registration for the event is now open, NCUA said; there is no fee.
LINK:
Understanding the Automated Cybersecurity Examination Tool (ACET)
(Oct. 15, 2021) In other NCUA webinar developments, the agency said this week that, on Oct. 27, it is hosting an event focusing on bias in home appraisals and the racial homeownership gap. (This topic was the subject of in-depth discussion during last August’s 2021 NASCUS State System Summit (S3)). The agency said the 90-minute session, which gets underway at 2 p.m. ET, will highlight how systemic and institutionalized discrimination in the U.S housing system has created a wide wealth gap between races. NCUA said discussion will focus on strategies for closing the homeownership gap and eliminating appraisal bias, due to its direct impact on wealth accumulation for minority homeowners. The event will also explore, the agency said, the collaborative efforts of federal agencies and other stakeholders to initiate valuation and housing policy reforms for more equitable outcomes in communities of color.
LINK:
Understanding Bias in Home Appraisals and the Racial Homeownership Gap
(Oct. 15, 2021) California legislation was signed into law this week, the California and Nevada Credit Union Leagues reported. The new law for state credit unions: allows expulsion of members for abusive behavior; simplifies how an expelled member may appeal; allows non-member deposits from other credit unions (giving CA CUs parity with FCUs and low-income designated credit unions); makes changes to how audit committees are governed; and makes other technical changes … Two jobs have opened up at the Oregon Department of Consumer and Business Services (DCBS); see the NASCUS Career/Job Postings page for more details … Federal Reserve Board Vice Chair for Supervision Randal Quarles – whose term in that role ran out this week, but who continues to serve until a successor is confirmed – will no longer chair the Fed Board’s committee on supervision and regulation. Instead, the Fed said this week, the three-member committee will only advance agenda items before it when there is “broad consensus” among Federal Reserve officials. That essentially means that all three committee members will have to agree to any rule changes to be proposed to the full board.
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