Compliance Blog

Written by Steve Van Beek

A couple of weeks ago, the NAFCU Board of Directors along with our senior staff met with Director Cordray and a few key players on the CFPB's rulewriting team.  You can read a news recap of the meeting here.  However, today I wanted to give you a brief rundown of some of the issues that NAFCU discussed with the CFPB.    

• Qualified Mortgages and the Ability to Repay Rule.  NAFCU indicated the CFPB needs to provide a safe harbor for qualified mortgages (rather than a rebuttable presumption).  NAFCU also discussed the difficultly of tying the qualified mortgage determination to metrics (debt-to-income ratio, etc.) because the metrics cannot take into account non-quantitative factors.   

• Proposal to Change Definition of Finance Charge.  NAFCU discussed the CFPB's proposal to amend the definition of finance charge - which would alter how the annual percentage rate (APR) is calculated.  We argued this change was not required by Dodd-Frank and the CFPB shouldn't add this large compliance burden to credit unions.  We have previously blogged on this issue here (drop the APR proposal), here (NAFCU's official comment letter) and here (potential impact on FCU usury ceiling).  

• Points & Fees.  NAFCU discussed how CFPB's proposed points and fees tests have the potential to hurt credit unions that have CUSOs.  The CFPB's proposals might treat fees from affiliates differently than fees from non-affiliates and this could make a credit union's mortgage look less competitive.  

• Remittances.  NAFCU provided an overview of the challenges facing credit unions as they try to comply with this new rule.  Credit unions are facing a huge compliance burden and many are working with third parties to find a solution.  But, that also brings with it third-party due diligence costs and considerations.  Many credit unions will be forced to stop offering remittances and those that continue to offer remittances will see a large fee increase passed along to their members.  

• Providing Formal Opinion Letters or Other Guidance.  NAFCU urged the CFPB to provide an avenue for credit unions to obtain a formal opinion from the CFPB.  A prior example was the CFPB's unwillingness to provide a formal opinion on the Change-In-Terms Notice issue that we blogged about in mid-October.  If the CFPB would have provided formal guidance, it would have saved credit unions lots of time and money (not to mention the reduction in headaches).  

Quick Tidbits.  The CFPB seemed interested in the issues NAFCU was raising.  Unfortunately, it did not seem they had the time or inclination to make the changes.  The CFPB pointed back to Dodd-Frank repeatedly to indicate that their hands were tied by Congress.  However, they did indicate they are looking at 12 month implementation period for the majority of the mortgage rules.  And, they are looking at how to improve their communication of the final rules to regulated entities (including a "plain English" guide of the mortgage changes).   

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NAFCU Offices Closing.  Just a heads up that NAFCU's offices will be closed next week and through the beginning of the year.  We won't be blogging during this period.  Of course, we don't need to tell anyone that 2012 has been a challenging year on the compliance front.  And, 2013 promises to bring many additional challenges as well.  We'll be charging our batteries and getting ready for 2013 and we hope you are able to as well.