June 01, 2020

NAFCU offers ways to reduce reg burden, improve access to FIs to CFPB

Kaley SchaferNAFCU's Kaley Schafer Friday offered several recommendations to the CFPB's Taskforce on Consumer Financial Law "to alleviate regulatory burdens, improve access for consumers, and mitigate ambiguities." The bureau in March issued a request for information (RFI) to inform the efforts of the taskforce as it looks for ways to improve and strengthen consumer financial laws and regulations.

Schafer, NAFCU's regulatory affairs counsel, also reiterated NAFCU's request that the bureau refrain from issuing new rulemakings amid the coronavirus pandemic – unless it is related to providing relief during the crisis to support recovery – as "credit unions need to focus on helping their members during these uncertain times and not new regulatory requirements."

Outlining the association's recommendations for the taskforce, Schafer specifically addressed:

Expanding Access

  • Fintechs: Schafer noted that "there is disparate regulatory treatment depending on the type of fintech firm. Non-bank fintechs do not undergo the same kind of regular examination that credit unions and other traditional financial institutions face." She asked the taskforce to preserve consumer protections and also ensure a level playing field. NAFCU has more information on its fintech recommendations available in this white paper.
  • Short-term, small dollar loans: The financial regulators understand that consumers need access to responsible, short-term, small dollar loans as demonstrated by their guidance issued during the coronavirus pandemic. Schafer reiterated NAFCU's request that the bureau expand the safe harbor to include all credit unions' payday alternative loan (PAL) offerings in its payday lending rule; the bureau is expected to issue a new rule on the issue soon.
  • Alternative data: Schafer highlighted how the use of alternative data in credit underwriting can expand consumers' access to financial products who might otherwise be "credit invisible." She asked the taskforce to work with financial regulators, including the NCUA, to enhance the use of alternative data and ensure best practices.

Consumer Data

  • Fair Credit Reporting Act (FCRA) and Gramm-Leach Bliley Act (GLBA): Arguing that the FCRA and GLBA are sufficient to ensure financial institutions protect consumer information and allow consumers control of the disclosure of their information, Schafer reiterated NAFCU's call "for a comprehensive federal data privacy standard that protects consumers, harmonizes existing federal data privacy laws, and preempts state privacy laws." She said doing so will prevent credit unions from being unduly burdened by differing state laws.
  • Data breach requirements: Schafer expanded on NAFCU's call for a comprehensive data protection standard, saying it should include "data breach requirements such as the payment of breach costs by breached entities, notifications of a breach to both consumers and financial institutions servicing accounts which have been breached, and for any negligent organization which is breached, a burden of proof that requires the establishment of a lack of fault regarding harm associated with the breach."


  • Fair Debt Collection Practices Act (FDCPA): Schafer highlighted that "credit unions are not the nefarious, bad actors that the Bureau intends to target" with its first-party debt collection rulemaking and urged an exemption for credit unions under the rule. She also recommended the bureau separate its first- and third-party debt collection rulemakings from its unfair, deceptive, or abusive acts or practices (UDAAP) authority to prevent overlap and confusion.
  • Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) integrated disclosure (TRID) guidance: Schafer thanked the bureau for providing some FAQs on TRID, but reiterated NAFCU's request for more TRID guidance to limit regulatory burdens under the rule.
  • Ability-to-repay/Qualified mortgage (ATR/QM): As the bureau considers a revised definition of a general QM in light of the expiration of the temporary government-sponsored enterprises (GSE) QM loan (GSE patch), Schafer highlighted credit unions' concerns about having to hold non-QM loans on their balance sheets and that using an average prime offer rate (APOR) approach "could disenfranchise otherwise creditworthy borrowers."
  • Small business data collection: Schafer said credit unions, which already serve small businesses the regulations for small business loan data collection intend to target, will face "challenges due to the constraints of credit union field of membership and statutory caps on member business lending" as the industry's data won't easily translate when compared to other lenders. Schafer asked that credit unions be exempt from any future rulemaking on this issue.

Improving Consumer Protections

  • Credit Card Responsibility and Disclosure Act (CARD Act): On credit card disclosures, Schafer highlighted the need for simple, easy-to-read formats to ensure consumers get the information they need. She also asked for flexibility in these disclosures as more is done via mobile and online banking.
  • Electronic Signatures in Global and National Commerce Act (E-SIGN Act): NAFCU has long argued that E-SIGN Act requirements are outdated and cause delays the processing of various banking functions; the association last month reviewed its request for relief with the CFPB. Schafer asked the taskforce to recommend amending these regulations "to allow credit unions to deliver electronic disclosures without having to obtain the consumer's prior consent" and for clarification on presumptive consent.
  • Overdrafts: As credit unions offer responsible overdraft programs, Schafer cautioned against actions that would interfere with this ability and instead asked the bureau to work with the NCUA on ways that allow credit unions the flexibility to tailor programs to meet individual member's needs. NAFCU continues to monitor the litigation landscape related to overdraft programs.

NAFCU will continue working closely with the bureau to obtain regulatory relief and clarity for credit unions. Read Schafer's full recommendations here.