March 7, 2013 – NAFCU urged the CFPB anew Wednesday on the need to ensure the integrated disclosures on mortgage loans under the Truth in Lending Act and Real Estate Settlement Procedures Act are useful to consumers and impose as little burden as possible on credit unions.
NAFCU Senior Regulatory Affairs Counsel Tessema Tefferi wrote to the CFPB regarding its proposal to conduct quantitative testing in fiscal 2013 and 2014 of the performance of the current vs. proposed disclosures. NAFCU lodged serious concerns about the integrated disclosures and underlying rules last November, and those concerns remain, he said.
Among NAFCU’s key concerns are:
- “Finance charge” and “annual percentage rate” definitions: Tefferi said the proposal’s inclusion of most up-front costs in the definition of finance charge will provide little benefit to consumers but greatly increase costs and burdens for credit unions.
- Disclosure of annual percentage rate: NAFCU is skeptical of the APR's use to consumers. After its own consumer testing, the Federal Reserve found that most consumers do not understand the APR, and many believe it represents the interest rate. The Fed concluded if consumers don’t understand what is included, it’s not useful. Tefferi said expanding its contents will not fix that.
The timing of the quantitative testing is also a problem, he noted. The CFPB has already indicated it intends to issue final rules on the proposed combined disclosures in September. This target date and the testing timelines don’t match up. For the testing to be meaningful, Tefferi recommended a delay in the rule until at least the first quarter of 2014.