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March 5, 2012 – A Regulation Z requirement for mortgage lender cost disclosures and a separate rule on ATM fee disclosures were among the key provisions NAFCU President and CEO Fred Becker on Friday urged be eliminated as part of the Consumer Financial Protection Bureau's regulatory streamlining project.

Reiterating a requirement NAFCU submitted on the CFPB's draft mortgage disclosure form, Becker urged that the CFPB eliminate a Reg Z requirement that lenders include their cost of funds on mortgage disclosures. He said the disclosure offers no useful information to consumers and could be misleading. He also urged that the CFPB set a minimum threshold of at least 50 refinancing transactions before credit unions would be subject to reporting requirements under Reg C, which implements the Home Mortgage Disclosure Act. That threshold would be more consistent with Reg Z without undercutting the policy rationale of HMDA.

Another ongoing concern is a requirement under Reg E, which implements the Electronic Funds Transfer Act, requiring that signs with fee information be affixed to automated teller machines. Becker called this requirement "redundant and unnecessary" since the on-screen disclosure on ATMs should be sufficient to notify consumers about fees before they complete their transactions. This disclosure requirement has triggered a number of baseless lawsuits, he added.

"Not only does the disclosure provide little, if any, benefit, it has grown increasingly costly for ATM operators as a result of litigation," Becker said. "In the case of not-for-profit, member owned credit unions, these costs are passed on directly to the member-owners."

Becker sent these and other recommendations Friday in response to the CFPB's call for input regarding regulations the bureau inherited from other regulators. The bureau is seeking input on which rules are unduly burdensome and could be streamlined or eliminated. Rulemaking and enforcement authority for these rules transferred to the CFPB last year.

In other Reg Z-related recommendations:

• Becker urged the CFPB to modify rules requiring lenders to conduct reviews every six months of credit card accounts where the annual percentage rate was increased. He said the rules should take into account a borrower's dramatic decline in creditworthiness. A cardholder's credit score could drop 50 percent or more, and credit unions would still be required to conduct these reviews, he pointed out. "NAFCU understands the purpose behind the requirement, however, to require reevaluations every six months indefinitely for all APR increases is unduly burdensome," said Becker.
• Becker also urged the CFPB to modify current Reg Z provisions that bar credit card issuers from considering household income when determining whether a consumer has the ability to repay a credit obligation. He said making such decisions solely on the basis of personal income is "shortsighted and disproportionately impacts non-working spouses."
• He offered recommendations for adjusting the three-day requirement for providing borrowers early disclosures after a mortgage application is received. The rule allows a waiver if the borrower is facing a bona fide financial emergency, but he said it only gives a single example of such an emergency. Becker said the CFPB should relax the waiver requirement and allow borrowers to waive the three-day period at their discretion.

For more, see the NAFCU comment letter.