BUREAU OF CONSUMER FINANCIAL PROTECTION [Docket No. CFPB–2022–0040] Federal Register Posting: Request for Information Regarding Relationship Banking and Customer Service
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Request for information.
SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) is seeking comments from the public related to relationship banking and how consumers can assert the right to obtain timely responses to requests for information about their accounts from banks and credit unions with more than $10 billion in assets, as well as from their affiliates.
DATES: Comments must be received by July 21, 2022.
Click here to read the full NASCUS Summary
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(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.
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(Nov. 12, 2021) A summary of NCUA’s new rule on federal credit union service organizations (CUSOs) – adopted Oct. 21 by the NCUA Board on a 2-1 vote – has been published by NASCUS; it is available to members only.
The final rule gives CUSOs owned by FCUs the power to originate any type of loan an FCU may originate – and give the NCUA Board more flexibility in approving permissible CUSO activities and services. It becomes effective Nov. 26. Board Chairman Todd Harper voted against finalizing the rule.
By allowing FCU-owned CUSOs to originate any type of loan an FCU can, the list of permissible loans by FCU CUSOs is expanded from only business loans, consumer mortgage loans, student loans, and credit cards. The list of new loans includes automobile and small-dollar (payday) loans – the two types NCUA has said would likely draw the newest involvement by CUSOs.
In its comment filed on the proposal last spring, 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 – a condition that 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.
Following the rule’s adoption last month, NASCUS President and CEO Lucy Ito said the association views the final rule as a “natural evolution” in a robust dual charter system. However, she noted the additional reporting requirements and added that the state system will review the final rule closely and work with NCUA to resolve any unintended, negative impacts on state credit union CUSOs.
LINK:
NASCUS Final Rule Summary: FCU CUSOs (Parts 712) (members only)
(Nov. 12, 2021) Any issuances of secondary capital not completed by Jan. 1 will be subject to the requirements of the new subordinated debt rule, which becomes effective on that date, according to a letter published late last week by NCUA.
NASCUS has published a summary of the letter, which like all summaries from NASCUS, is available to members only.
The NCUA letter to credit unions ((LTCU 21-CU-13) states there is one potential exception: low-income designated credit unions are allowed to issue secondary capital approved in 2021, irrespective of the date of issuance, under a proposed rule issued by the agency in September. A final version of the rule, the letter stated, will be considered by the NCUA Board by Jan. 1.
The subordinated debt rule was approved by the NCUA Board nearly a year ago (in December 2020), with an effective date of the beginning of the new year. That rule allows well-capitalized, low-income designated, federally insured credit unions to count subordinated debt as capital for risk-based net worth purposes.
The proposal issued in September would amend that rule, slightly, by accommodating low-income credit union (LICU) access to federal investment programs, most notably the Treasury Department’s Emergency Capital Investment Program (ECIP). That program directs Treasury to make investments in “eligible institutions” to financially support small businesses and consumers in low-income and underserved communities. Those institutions include federally insured credit unions that are minority depository institutions (MDIs) or community development financial institutions (CDFIs) that are in sound financial condition. The investments are made in the form of subordinated debt.
Funding of secondary capital approved under the current rule would be permitted under the proposal beyond 2021, without the need to reapply under the subordinated debt rule – thus giving those credit unions a measure of regulatory relief.
“Given the current 45-day review period for secondary capital plans, any low-income credit union still planning to submit a secondary capital plan should do so as soon as possible,” the NCUA letter states. “Further, if a low-income designated credit union plans to submit a secondary capital plan this year, it should consider using the application requirements in section 702.408 of the final subordinated debt rule when drafting its plan and submitting an application.
“This can help avoid having to resubmit documentation as long as the application meets the requirements of the final rule,” NCUA wrote.
LINKS:
NCUA LTCU 21-CU-13: Subordinated Debt Final Rule Effective January 1, 2022
(Nov. 5, 2021) Credit unions are encouraged to participate in the free program that helps members address their federal income taxes; credit unions have until Nov. 15 to contact the IRS about their interest in participating, NCUA said this week.
In its letter to credit unions (LTCU) 21-CU-12, the agency said the IRS Volunteer Income Tax Assistance (VITA) program provides education for consumers on refundable credits, including the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). The agency noted that the refundable federal tax credits can provide thousands of dollars to working individuals and families with low to moderate incomes.
The letter outlines the benefits of participating in the VITA program (which NCUA described as potential for attracting new members, asset- and wealth-building opportunities for members and greater financial education and financial stability for members, among other things), and lists the ways credit unions may participate, and methods for doing so.
NASCUS has posted a summary of the letter (available to members only).
LINK:
NASCUS Summary, NCUA LTCU 21-CU-12 (members only)
(Oct. 8, 2021) Three new summaries were posted by NASCUS this week on: An NCUA regulatory alert on credit union credit card data submission to the CFPB; an NCUA letter to credit unions about the expiration of homeowner protection programs during the coronavirus crisis; and NCUA’s proposal to amend its subordinated debt rule to allow for the Treasury Department’s Emergency Capital Investment Program (ECIP).
All of the summaries are available to members only.
On Sept. 29, the NCUA issued a “regulatory alert” (21-RA-09) that essentially put credit unions on notice that they may begin submitting data on credit card agreements with their members, and applying data submission requirements, to CFPB’s “Collect” website, which gathers credit card information. The alert also lists important dates for credit unions to consider when submitting their data.
On Sept. 27, the agency sent a letter to federally insured credit unions (letter 21-CU-09), which outlined “critical information” for compliance with expiring pandemic-era homeowner protection programs. The letter noted several key areas, including the deadline for granting forbearance on mortgage payments. It also outlined steps that credit unions may take to continue providing relief to homeowners, even though several programs had expired.
Finally, on Sept. 23 – because of its monthly meeting – the NCUA Board issued a proposal to amend its new subordinated debt rule to accommodate credit union access to federal investment programs – but making no other changes to the rule taking effect Jan. 1. The proposal, according to NCUA staff, would amend the definition of “grandfathered secondary capital” to include any secondary capital issued to the U.S. government or one of its subdivisions under an application approved before Jan. 1, “irrespective of the date of issuance” (that is, when funds are issued), primarily to benefit low-income credit unions (LICUs).
LINKS:
NASCUS Summary: Navigating and Understanding the End of Pandemic-Era Homeowner Protection Programs
NASCUS Summary: Changes to NCUA Subordinated Debt rule
(Oct. 8, 2021) A summary of a proposal by the CFPB to collect business loan data from lenders has been published and posted by NASCUS. Comments on the proposal are due on or before Jan. 6.
The summary is available to members only.
The proposal was issued early last month (Sept. 1) and is aimed, according to the bureau, at “helping regulators and the public better understand the business lending market.”
The proposal would require lenders to disclose information about their lending to small businesses. According to the bureau, lenders would be required to report the amount and type of small business credit applied for and extended, demographic information about small business credit applicants, and key elements of the price of the credit offered.
That information would allow it to learn, the agency said, how small enterprises fare when trying to access financing, and what barriers are holding them back from further prosperity.
CFPB noted the rule was mandated by the legislation which created the bureau, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
In comments to the press Sept. 1, CFPB then-Acting Director Dave Uejio said the bureau and the public don’t know enough about whether small businesses have fair access to the capital they need to generate new jobs and grow the economy.
LINKS:
NASCUS Summary: CFPB September 2021 Proposal Regarding Small Business Lending Data Collection
CFPB Proposes Rule to Shine New Light on Small Businesses’ Access to Credit
(Sept. 10, 2021) NCUA’s request for information (RFI) on digital assets and related technologies is the latest summary posted on the association’s website; comments are due Sept. 27.
Like all NASCUS summaries, it is available to members only.
In July, the NCUA issued the RFI, with a particular eye on current and potential uses for credit unions and the risks associated with them. NCUA said the effort is to engage the credit union system and other stakeholders in learning how emerging distributed ledger technology (DLT) and decentralized finance (DeFi) applications are viewed and used. In particular, the agency said, it wants feedback on the role NCUA can play in “safeguarding the financial system and consumers in the context of these emerging technologies.”
The agency described DeFi as the broad category of applications adopting peer-to-peer networks to create digital assets like cryptocurrency and crypto-assets, clearing and settlement systems, identity management systems, and record retention systems. DLT (which includes blockchains) consists of a shared electronic database where copies of the same information are stored on a distributed network of computers.
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(Aug. 27, 2021) Two new summaries of recent CFPB rules – on clarifying the impact of the Juneteenth holiday, and Military Lending Act (MLA)-related exams – have been developed and posted by NASCUS. The summaries are available to members only.
In an interpretive rule issued in July, the bureau attempted to clarify when the new Juneteenth holiday (federally observed for the first time this past June) counts as a business day or federal holiday for purposes of mortgage rescissions and disclosures. According to the rule, that depends on when the relevant time period for the loan began. According to the bureau, if the relevant time period began on or before June 17, then June 19 was a business day. If the period began after June 17, then June 19 was a federal holiday. The timing effects rescission of closed-end mortgages and TILA-RESPA integrated disclosures, the bureau said.
Regarding MLA, the agency said in an interpretive rule effective in June that examinations under the law will now resume, asserting that the prior administration’s reasoning for discontinuing the reviews were not found persuasive. The rule explains 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%.)
LINKS:
(Aug. 20, 2021) Summaries of three recent issuances from NCUA – on capitalizing loans, the rollout of the new examination tool, and on mortgage servicing rules – were published by NASCUS this week.
All three are available to members only. The summaries cover issuances – two letters to credit unions and one regulatory alert – issued by the agency over the last three weeks or so.
Early this month, the agency issued letter to credit unions (LTCU) 21-CU-07, which outlined limits on capitalization of loans to members. In particular, the letter pointed out, the financing of fees and commissions continue to be prohibited for federally insured credit unions, despite adoption of the new rule earlier this year allowing capitalization of loan interest. In the letter, the agency said that maintaining the prohibition on capitalization of fees “is an important consumer protection feature of the rule for member borrowers.”
In June, the agency’s board voted unanimously to lift the prohibition of capitalization of interest in connection with loan workouts and modifications; the rule took effect July 30. The change was made, NCUA said, to give borrowers additional access to loan workouts, perhaps caused by the economic disruption caused by the coronavirus crisis.
The second letter (LTCU 21-CU-08) summarized listed the new applications (and their implementation) the agency is employing for assisting in exams and communicating to credit unions. The letter, issued just last week, noted that the agency would begin transitioning to its new Modern Examination and Risk Identification Tool (MERIT) exam tool and other applications meant to modernize and streamline the agency’s operations. The other tools include the Data Exchange Application (DEXA), the Administrative Portal, and the Consumer Access Process and Reporting Information System (CAPRIS) for federal credit unions.
The letter also offers insights about who at credit unions can use the new tools, and how the tools integrate with state supervisory authority (SSA) examination and supervision programs.
The third item summarized by NASCUS and published this week is of a regulatory alert (21-RA-08), which urges review of CFPB mortgage servicing rules. According to the alert, credit unions are urged to review the June 30 rule temporarily amending certain mortgage servicing requirements under the bureau’s Regulation X to assist borrowers affected by the COVID-19 emergency. The alert noted that the CFPB rule — which takes effect Aug. 31 — only applies to servicers that service mortgages secured by a borrower’s principal residence and does not apply to small servicers.
LINKS:
NASCUS summary: LTCU 21-CU-07, Capitalization of Unpaid Interest (members only)
NASCUS summary: LTCU 21-CU-08, Implementation of Modernized Systems (members only)
NASCUS summary: 21-RA-07 Equal Credit Opportunity Act (Regulation B) (members only)
(July 16, 2021) Rule changes to incorporate just-issued national priorities for combatting money laundering and financing of terrorism – as outlined in an NCUA Letter to Credit Unions (LTCU) late last month — are summarized by NASCUS and posted this week; like all summaries, it is available to members only.
Late last month, NCUA issued LTCU 21-CU-05, which detail priorities for anti-money laundering (AML) efforts and countering the financing of terrorism (CFT) set by the Treasury’s Financial Crimes Enforcement Network (FinCEN). The priorities describe “the most significant AML/CFT threats currently facing the United States,” according to FinCEN. The priorities include corruption, cybercrime, domestic and international terrorist financing, fraud, transnational criminal organizations, drug trafficking organizations, human trafficking and human smuggling, and proliferation financing.
NCUA (as stated in its letter to credit unions) indicated that while it is not required to do so, the agency plans to propose changes to its own BSA rules addressing the priorities. Credit unions (as well as banks and nonbanks, the target of a separate FinCEN statement) are not required to make any changes in their risk-based BSA compliance programs, and examiners will not review institutions for incorporation of the AML/CFT priorities into those programs, until the effective date of a final rule, NCUA and FinCEN said.
Also in its letter, NCUA said credit unions “may wish to start considering how they will incorporate the AML/CFT Priorities into their risk- based BSA compliance programs.”
LINK:
NASCUS Summary: Letter to Credit Unions 21-CU-05 Interagency Statement on the Issuance of the AML/CFT National Priorities (members only)
(July 16, 2021) Summaries of two final rules – on transition to the new current expected credit loss (CECL) accounting standard, and on derivatives – have been posted on the NASCUS website. Both summaries are available to members only.
At its June meeting, the NCUA Board adopted a final rule intended to mitigate the day-one effect of the CECL accounting standard on capital levels at credit unions. The new rule takes effect Aug. 2 (although NCUA, when the final was adopted, that credit unions could begin applying it immediately); the CECL standard takes effect for most credit unions in January 2023.
Supported by NASCUS, the rule establishes a three-year phase-in period for adverse effects on credit unions’ regulatory capital triggered by the effect of the accounting standard. Federal credit unions with less than $10 million in assets and also state credit unions (if allowed by their state regulations), would be exempted from using the standard to figure loan loss reserves.
The final rule has two changes from the proposal, as advanced by NASCUS. First, the rule makes a technical change (for clarity) removing references to specific calendar dates in the transition period for the phase in. The rule now consistently refers to fiscal years. The second change clarifies that state-chartered FICUs with less than $10 million in assets and that are required by state law to comply with generally accepted accounting practices (GAAP) are eligible for the transition phase-in.
However, NASCUS also noted that the accounting standard remains of concern. “NASCUS, many state credit union regulators, and many state credit union system stakeholders remain concerned that the CECL methodology will be counter-productive when implemented for the credit union system,” NASCUS wrote.
The derivatives rule, approved unanimously by the NCUA Board at its May meeting, makes some changes from the proposal issued in December. The rule affects a limited number of federal credit unions directly (NCUA estimates about 30 FCUs are engaged with derivatives now); it generally offers more flexibility for credit union involvement in the investment vehicles, primarily to manage interest rate risk. State-chartered credit unions follow rules set by their individual regulators.
NASCUS had urged the agency, in its comment on the proposal, to eliminate redundant supervisory notice requirements, where applicable, by providing an exemption from its notice requirement for FISCUs in states where pre-approval or pre-notification is required to be given to the state regulator. NCUA declined to make that change, arguing that “the current burden to a FISCU is unchanged as the FISCU is only notifying the applicable (NCUA) Regional Director after entering into its first Derivative transaction compared to the current requirement of notifying the Regional Director at least 30 days before it begins engaging in Derivatives.”
LINKS:
NASCUS Summary: Final Rule, Part 702, Current Expected Credit Loss (CECL) Methodology (members only)
NASCUS Summary: Final Rule, Parts 701, 703, 741, and 746, Derivatives (members only)