Newsroom

February 22, 2012

Shea urges CFPB to simplify Reg Z

NAFCU yesterday urged the Consumer Financial Protection Bureau to take steps to simplify and streamline substantive changes to Regulation Z, which the bureau republished recently, to minimize the cost and regulatory burden posed for small institutions such as credit unions.

Dillon Shea, NAFCU's regulatory affairs counsel, pointed to a number of projects at the CFPB that will affect credit unions' responsibilities under the Truth in Lending Act, which Reg Z implements. These include:

  • the Know Before You Owe project for mortgage disclosures;
  • a rule, yet to be finalized, on what will be defined as a qualified residential mortgage that doesnot trigger a 5 percent risk retention requirement for originators;
  • an uncompleted Federal Reserve proposal on escrow accounts that the CFPB will likely address;
  • a comprehensive proposed rule on mortgage lending that, while withdrawn by the Federal Reserve Board, is likely to be addressed by the CFPB;
  • the CFPB's test of new credit card disclosures (likely to trigger substantive changes to Reg Z credit-card rules); and
  • student lending practices.

"These projects the CFPB is working on are in addition to a number of changes to Regulation Z that have already taken place over the last two years," Shea noted.

Some of these projected are mandated by the Dodd-Frank Act, and some, such as the Know Before You Owe project, will prove successful, he said. But "credit unions are understandably concerned that one set of major revisions to Regulation Z may be followed soon after by a second, and possibly even third set, of major changes affecting the same provisions."

Shea urged that the CFPB ensure it addresses its obligations under the Small Business Regulatory Enforcement Fairness Act as it proceeds with new rules. These obligations include considering any projected increase in the cost of credit for small entities, examining significant alternatives that accomplish the stated objectives while minimizing any increase in the cost of credit for small entities, and considering the advice and recommendations of small entities.

Noting the multitude of Reg Z changes in recent years, he urged the CFPB "to use its discretion, working within the confines of the statute, to simplify and streamline the amendment process going forward."