WASHINGTON—NAFCU and CUNA have each sent letters to the Federal Financial Institutions Examination Council regarding a proposed revision to its rating system that would require CFPB to provide a separate composite rating for all credit unions with assets of more than $10 billion.
The requirement is part of a proposed revision to the Uniform Interagency Consumer Compliance Rating System. FFIEC is proposing this revision because the CC Rating System has not been updated in 30 years.
NCUA examiners use the rating system to evaluate credit unions’ adherence to consumer compliance requirements, NAFCU explained. Michael Emancipator, NAFCU’s senior regulatory affairs counsel, wrote that under the proposed revision, “examiners would no longer focus as heavily on individual transactions to ensure consumer compliance, but would rather focus more on a credit union’s compliance management system (CMS) to determine compliance on a systemic level.”
Emancipator added that a review of credit union’s compliance management system by both NCUA and CFPB is redundant and that overlapping reviews “can lead to different ratings from each agency, or worse, conflicting guidance for each credit union.”
“By requiring the CFPB to conduct a separate review and rating of a credit union, the Council is creating a situation where a credit union is susceptible to prioritizing one agency’s findings over the other to come into compliance with applicable regulations,” he added.
Emancipator wrote that for those credit unions that hold more than $10 billion in assets, the revised rule should “require the NCUA and CFPB to collaborate and issue a single, unified rating.” In its letter, CUNA said it appreciated that the FFIEC’s revisions reflect the regulatory, examination, technological, and market changes that have occurred since the initial establishment of the current rating system.
CUNA said it supports the shift to a risk-based, tailored-examination focus as opposed to the current focus on transaction testing.
“We greatly appreciate the rulemaking’s premise that ‘the CC Rating System [was] not developed to set new or higher supervisory expectations for financial institutions and their adoption will represent no additional regulatory burden,” wrote CUNA. “We lament that any change in a standard must certainly create some sort of regulatory burden therefore, and thus, we urge the agencies (for credit unions, the CFPB and NCUA), to follow this statement with fervor. If indeed these changes properly implement a risk-based tailored-examination focus, they should ideally result in a lessened regulatory burden on credit unions.”
CUNA’s letter also noted support of NCUA’s representation in the proposal that the principles and standards of the CC Rating System will be integrated into the existing CAMEL rating structure, in place of a separate rating.
“CUNA believes the integration into the Management component is an appropriate place to assess an institution’s compliance risk, as opposed to having a stand-alone rating,” CUNA concluded.