WASHINGTON–Both NAFCU and CUNA each sent letters to the House Financial Services Committee Tuesday supporting the Financial CHOICE Act, which is to be the subject of a hearing today on Capitol Hill.
NAFCU's letter focused on the CFPB and repeal of the Durbin rules.
CUNA is calling the Financial CHOICE Act a “good first step,” but also raised several aspects of the legislation with which it said it has “concerns.”
“We appreciate that the Committee is taking a bold initial step in the legislative process and we thank Chairman (Jeb) Hensarling for his leadership in this effort," wrote CUNA CEO Jim Nussle. "As this and other legislation moves through the process, we will work with the House and the Senate to ensure the legislation ultimately enacted into law meaningfully reduces credit unions’ regulatory burden and maintains important consumer protections.”
CUNA said it supports the following provisions in the CHOICE Act:
- Allowing qualifying credit unions (with an average leverage ratio of at least 10%) to be exempt from certain provisions of the Federal Credit Union Act and rules and regulation promulgated by NCUA.
- Changing the structure and authority of the Consumer Financial Protection Bureau (CFPB). This includes bringing the bureau under the appropriations process; establishing an independent inspector general, removing its Unfair, Deceptive and Abusive Acts authority; establish an office of economic analysis; and repeal its authority to restrict arbitration.
- Providing relief from the Home Mortgage Disclosure Act by increasing reporting requirement thresholds to 100 closed-end and 200 open-end mortgages.
- Adjusting the definition of “points and fees” under the Qualified Mortgage (QM) rule.
- Classifying loans held by financial institutions in portfolio as QM loans.
- Exempting mortgage loans made by financial institutions under $10 billion in assets and held in portfolio for 3 years from the Truth in Lending Act’s escrow requirements and exempting mortgage servicers that service fewer than 20,000 mortgages annually from the requirements of Section 6 of the Real Estate Settlement Procedures Act.
- Requiring NCUA to allow examination and public comment it its budget before adoption and requiring more transparency regarding the overhead transfer rate.
- Reforming the examination process by creating an independent ombudsman and an independent appeals process.
- Protecting properly trained financial institution employees that report in good faith suspected financial elder abuse.
- Requiring CFPB and NCUA and other regulators to account for an entity’s size and risk when promulgating regulations.
- Repealing the Durbin Amendment.
- Prohibiting regulators from forcing a financial institution to close certain accounts for certain industries.
Where CUNA Has Concerns
Meanwhile, CUNA said it has concerns with provisions that would allow federal savings association to operate as national banks, bring NCUA under the appropriations process and others.
Specifically, CUNAs letter also requests the following proposals be included in the bill:
- Strengthening CFPB’s exemption authority under section 1022 of the Dodd-Frank Act.
- Installing a 5-person commission to lead CFPB.
- Giving credit unions parity with banks by exempting 1-4 family non-owner occupied residential loans from the member business lending cap.
- Clarifying that the Dodd-Frank Act exempts by the business of insurance from CFPB authority.
NAFCU's Focus
"Regulatory burden is the top challenge facing credit unions today. Reducing burdensome and unnecessary regulatory compliance costs is the only way for credit unions to thrive and continue to provide their member-owners with basic financial services and the exemplary service they need and deserve," Berger wrote. "NAFCU believes that credit unions must have a positive regulatory environment that allows them to succeed."
Berger notes several elements that would help create that positive environment. Key provisions include changes to mortgage rules, financial institution examination reform, revisions in Home Mortgage Disclosure Act limits and language calling for an examination of appropriate risk capital.
"The provision eliminating the Durbin interchange price cap and routing restrictions in the discussion draft is among the most significant aspects of this legislation for credit unions, and we strongly urge you to maintain it throughout the legislative process," Berger added.
The NAFCU president, in the letter, also reiterated the association's support for a commission structure for the CFPB. Meanwhile, he noted that the proposed CFPB reforms in the bill would provide credit unions with relief, for example, by removing the authority with respect to unfair, deceptive or abusive acts and practices (UDAAP) and shifting it back to functional regulators such as the NCUA. He also supported the draft provision to end the CFPB's preemption over functional regulators with respect to consumer laws. He urged the committee to go even farther and to expand the CFPB's exemption authority under Section 1022 of the Dodd-Frank Act.
Berger noted other aspects of the draft supported by NAFCU, including:
- Retention of the three-member structure of the NCUA board (though he said it's unnecessary to bring the agency under the congressional appropriations process as the draft proposes).
- The transparency and independent oversight it brings to the NCUA in the form of budget hearings, an independent appeals process and more transparency regarding the overhead transfer rate.
- The assurance of a cost-benefit analysis for regulations to be reviewed by Congress.
Berger also noted the need to address non-bank financial services providers. "We also would hope that the discussion draft could be further clarified to ensure that there is a federal regulatory structure, whether the new CFPB/Consumer Law Enforcement Agency or not, for non-bank financial services market players that do not have a prudential regulator," he stated.