October 17, 2019

HMDA, innovation, more discussed during CFPB hearing

Capitol HillCFPB Director Kathy Kraninger addressed a number of key issues affecting credit unions – including the Home Mortgage Disclosure Act (HMDA), innovation, qualified mortgage (QM) patch, and more – during her testimony before the House Financial Services Committee Wednesday.

Kraninger is providing the bureau's semi-annual report to Congress this week, and will testify before the Senate Banking Committee today. NAFCU Vice President of Legislative Affairs Brad Thaler sent a letter ahead of today's hearing reiterating the association's call for the bureau to better use its exemption authority to ensure credit unions are not overly burdened.

Here's an overview of some of the issues Kraninger discussed yesterday:

Data collection

  • HMDA: Kraninger said the bureau "wants to balance the burden on smaller entities and promote fair lending." The bureau is currently considering ways to reduce the burden of HMDA compliance. NAFCU has encouraged the bureau to eliminate data points that ultimately do not support HMDA's statutory objectives and to consider privacy concerns related to reporting data that could allow mortgagors to be identified.
  • Small business data collection: Kraninger explained that it is a mandatory rulemaking stipulated by the Dodd-Frank Act and plans to hold a future symposium on the issue. The bureau issued a request for information on the issue in 2017; NAFCU has found that it is a "marginally manual" process for credit unions and has urged the bureau to exempt credit unions from any future rulemaking given the strict limits the industry has on member business lending.
  • Privacy: Kraninger told the House Financial Services Committee that the bureau is looking to bolster its protection of data that it collects, but noted that the Dodd-Frank Act specifically excludes from the CFPB's rulemaking, examination, and enforcement authority certain requirements for financial institutions covered under the Gramm-Leach-Bliley Act.

CFPB rulemakings/guidance

A number of CFPB rulemakings underway were brought up during Wednesday's hearing. Of note for credit unions:

  • Innovation: Kraninger gave lawmakers more details about the bureau's recently finalized innovation policies that are intended to promote innovation and facilitate compliance at financial institutions. She said the bureau is looking at ways to use alternative data models to ensure more consumers have access to credit, and how artificial intelligence could be used to improve fair lending compliance.
  • QM patch: The bureau released an advance notice of proposed rulemaking to revise the General QM definition in light of the possible ability-to-repay (ATR)/QM patch expiration. Kraninger said the bureau is reviewing comments received to determine a transition period and address ATR requirement concerns.
  • Remittance rule: Rep. Barry Loudermilk, R-Ga., expressed concerns about consumers losing access to these services as the bureau's exemption is set to expire. Kraninger said the bureau is considering comments received to address threshold concerns and intends to include an item on its fall rulemaking agenda. NAFCU flagged that many credit unions have stopped offering these services as a result of the high compliance burden and costs.
  • Unfair, deceptive, or abusive acts and practices (UDAAP): Earlier this year, the bureau held a symposium focused on clarifying "abusive" under UDAAP. NAFCU has long advocated for the bureau to issue specific guidance on prohibited practices so financial institutions have more clarity on this issue, and has asked the bureau to provide guidance to clarify its UDAAP standard. Kraninger indicated that the bureau is reviewing feedback to determine its next step in potential guidance on the issue.

CFPB constitutionality/authority

Last month, the bureau announced it will no longer defend its single-director structure. Kraninger reiterated this stance during Wednesday's hearing, saying that the bureau's statutory director-removal provision should be reviewed as it may be unconstitutional. NAFCU is supportive of reforming the bureau's structure to a bipartisan commission to ensure multiple perspectives are represented in its decision-making process; this was communicated to lawmakers ahead of yesterday's and today's hearings.

Kraninger also reminded lawmakers about her request for legislation that would give the bureau clear authority to supervise institutions for compliance with the Military Lending Act (MLA). This rule has posed many compliance challenges to credit unions and NAFCU has continued to push for clarity in the form of guidance or revisions.