Sept. 24, 2012 – NAFCU on Friday urged the Consumer Financial Protection Bureau to reconsider its proposed revision to what goes into the “finance charge,” noting the costs of the proposal would impose extraordinary costs on credit unions while yielding only marginal, if any, benefits to consumers.
NAFCU President and CEO Fred Becker, in Friday’s comment letter, said the bureau should focus on the specific mandates of the Dodd-Frank Act and not create new rules that will only increase the time and money credit unions and other institutions must expend on regulatory compliance.
The Federal Reserve Board, which opened up this issue before its consumer financial rules were transferred to the CFPB, acknowledged that the annual percentage rate, or APR, which includes all the elements of the finance charge, is not widely used by consumers and is generally poorly understood. And while the CFPB holds that the revised figure it proposes would be easy to calculate, the change would still require a large scale change in systems and processes for lenders.
“Currently, lenders must calculate one APR for closed-end and open-end loans,” Becker wrote. “Under the proposals advanced by the Bureau, lenders would be required to calculate an APR for closed-end loans for disclosure purposes and a transaction coverage rate for closed-end loans for coverage purposes. Further, the proposed more inclusive finance charge only applies to open-end loans, which only further complicates the issue.”
Becker said lenders’ job complying with the proposed mortgage lending disclosure rules is made even more complicated by the CFPB’s proposal to revise Home Ownership and Equity Protection Act rules.
“If the CFPB moves forward with the more inclusive definition of the finance charge,” he wrote, “it must make corresponding amendments to HOEPA rules, and any other affected rule.”
Becker also on Friday urged NCUA to begin examining options it might pursue if the CFPB moves forward with its proposal. “Specifically, NAFCU recommends taking steps to clarify how credit unions should calculate the finance charge for different products,” he said in a letter to NCUA Chairman Debbie Matz.