The Covid-19 pandemic has seen emergency regulatory changes made at the NCUA and in the broader financial services industry. Regulation D transfer limits have been suspended until the Federal Reserve deems it appropriate to re-impose the original rule. At the NCUA, the Central Liquidity Facility (CLF) has been modified to lower the barriers to participated and to increase the lending authority of the CLF to $25 billion. NAFCU has called on Congress to make these changes permanent.
Due to NAFCU advocacy, several bills have been introduced in the 116th Congress to help credit unions with regulatory burdens.
On March 8, 2019, Representatives Lee Zeldin (D-NY) and Vincente Gonzalez (D-TX) introduced H.R.1661 to provide the NCUA with the authority to extend the maturity on certain loans for longer than 15 years.
On March 4, 2020, Senators Tim Scott (R-SC) and Catherine Cortez Masto (D-NV) introduced the Expanding Access to Lending Options Act (S. 3389). The bipartisan bill would provide the NCUA with greater flexibility for maturity products up to 20 years and remove restrictive requirements on mortgages.
On February 26, 2020, Representative Katie Porter (D-CA) introduced the Credit Union Board Modernization Act (H.R. 5981) to reduce the frequency of meetings required of a credit unions board of directors from 12 to six per year.
On February 24, 2020, Senators Tina Smith (D-MN) and Ben Sasse (R-NE) introduced the Credit Union Governance Modernization Act of 2020 (S. 3323) to provide credit unions with more flexibility to expel members who have a history of bad behavior. On August 5, 2020, Representatives Tom Emmer (R-MN) and Ed Perlmutter (D-CO) introduced a House companion to this legislation.
After years of NAFCU advocacy and credit union grassroots efforts, Congress passed the NAFCU-backed Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) on May 22, 2018. Two days later, President Trump signed the bill into law.
Immediately following the bill’s passage in Congress, NAFCU President and CEO Dan Berger sent a letter thanking President Trump for his leadership on helping Main Street financial institutions, and urging him to sign the bill. In addition, Berger personally contacted White House staff again to thank them for their dedication to regulatory relief efforts and for working with NAFCU.
S. 2155 includes various credit union regulatory relief measures related to member business lending and the Home Mortgage Disclosure Act. More details on the NAFCU-supported provisions of the bill can be found here. A detailed analysis of the provisions in S. 2155 that are most relevant to credit unions can be found here.
NAFCU has made providing credit unions with regulatory relief a vital part of its Coronavirus advocacy throughout 2020. Financial regulators have shown flexibility and understanding in working with credit unions during the unprecedented crisis so that they can help their members. Below are just a few of the measures that regulators have taken to assist credit unions and their members.
- Consumer Financial Protection Bureau (CFPB): On March 10, NAFCU sent a letter to the CFPB asking for a minimum of 60 days of broad compliance relief. On March 26, the CFPB announced that it will not expect quarterly Home Mortgage Disclosure Act (HMDA) or Regulation C filings, filings related to credit card and prepaid accounts reporting requirements under the Truth in Lending Act, Regulation Z, and Regulation E, and would work with credit unions in scheduling examinations and other supervisory activities to minimize disruption. On April 2, the CFPB lent its support to efforts by financial institutions to provide consumers with payment relief and provided that enforcement actions won’t be taken against credit unions “who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.” On April 3, the Board of Governors of the Federal Reserve System, CFPB, Federal Deposit Insurance Corporation (FDIC), NCUA, and Office of the Comptroller of the Currency (OCC) (Federal financial regulators) issued a joint-policy statement providing needed regulatory flexibility for mortgage servicers regarding certain communications to consumers required by the mortgage servicing rules.
- Federal Housing Finance Agency (FHFA): On March 19, FHFA directed the government-sponsored enterprises (GSEs) to suspend foreclosures and evictions of homeowners with GSE-backed single-family mortgages for at least 60 days. On March 24, FHFA announced changes to allow the GSEs to enter into additional dollar roll transactions, provide alternative flexibilities to satisfy appraisal and employment verification requirements, and suspend evictions for renters unable to pay rent due to the coronavirus. In its April 1 letter to FHFA Director Calabria, NAFCU ask for assistance with forbearance requirements because of capital concerns and other operational challenges, especially if nonbank mortgage servicers were to fail due to liquidity issues.
- National Credit Union Administration (NCUA): On March 16, NCUA released a Letter to Credit Unions outlining consumer relief measures that credit unions could provide their members without penalty during exams or enforcement action. Additionally, the NCUA mandated that all examination and supervision activities take place offsite and noted that examiners will be “mindful of the impact” of information requests. On March 25, NAFCU urged the NCUA to provide equivalent capital relief to that being offered to banks and detailed relief measures that the NCUA could take regarding subordinated debt, approval of secondary capital applications, and modification of stress testing and capital planning rules to provide additional capital flexibility. In its March 26 letter, NAFCU recommend the NCUA should temporarily cease all examination activity unless critical to the safety and soundness of the institution. Additionally, the NCUA has extended comment periods and delayed rulemaking not relevant to the Coronavirus. In its April 7 joint-policy statement, Federal financial regulators noted that examiners will exercise judgment in reviewing loan modifications, including troubled debt restructurings (TDRs), and will not criticize prudent efforts to modify existing loans for customers affected by the Coronavirus.
In the 115th Congress, NAFCU members testified before various Congressional committees on behalf of the association to educate lawmakers on the pressing need to provide regulatory relief to the nation's credit unions.
On June 8, 2017, Steve Grooms, President/CEO at 1st Liberty Federal Credit Union, testified before the Senate Banking Committee at a hearing entitled “Fostering Economic Growth: The Role of Financial Institutions in Local Communities.” Grooms outlined how Dodd-Frank regulations have harmed his credit union and the industry as a whole and called on Congress to clarify the CFPB's ability to exempt credit unions from certain rules.
On March 21, 2017, Keith Stone, President/CEO at The Finest Federal Credit Union, testified before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit calling for a reduction of regulatory obstacles that burden credit unions both during the initial chartering stage as well as when new product lines are introduced.
Regulatory relief for community-based financial institutions was also a hot topic in the 114th Congress. NAFCU testified before the House Financial Services and Senate Banking Committees on regulatory relief priorities for credit unions, including the impact of the NCUA's second risk-based capital proposal, field of membership changes, and many other issues. View more congressional testimony from NAFCU member credit unions on regulatory relief here.
Agency Rulemakings and Actions
While regulatory relief is unlikely to be a focus in the 116th Congress, the Trump administration and federal agencies have indicated that regulatory relief is still a priority for them. Some of the promising steps taken by relevant agencies recently or indicated in the fall 2019 agenda for regulatory and deregulatory actions are outlined below:
- CFPB: In February 2019, the CFPB issued two proposals to address concerns with its 2017 payday lending rule. One proposal would remove mandatory underwriting requirements, including ability-to-repay (ATR) provisions, and the other proposal delays the compliance date by 15 months to November 19, 2020. NAFCU is supportive of the delay and has recommended the CFPB provide a safe harbor to all credit union payday alternative loan (PAL) products. In May 2019, the CFPB issued a proposed rule to adjust collection and reporting thresholds under the Home Mortgage Disclosure Act (HMDA), as well as an advance notice of proposed rulemaking to gather information on the costs and benefits of reporting certain data points under HMDA. In addition, the CFPB issued a request for comment in November regarding its plans to assess the TILA/RESPA integrated disclosure (TRID) rule. In January 2020, CFPB Director Kraninger announced plans to extend the Ability to Repay/Qualified Mortgage rule’s exemption for loans covered by the GSE Patch. Later in January, NAFCU joined National Association of REALTORS, Independent Community Bankers Association, and others to advocate for the continued use of a modified DTI ratio paired with certain compensating factors and changes to Appendix Q to rely on more flexible and dynamic standards for calculating income and debt.
- NCUA: In July 2019, the NCUA finalized a rule that increases the threshold at which appraisals are required for nonresidential real estate transactions. In December 2019, the agency finalized a rule to delay the risk-based capital rule for an additional two years, to January 1, 2022 In March 2020, the NCUA published a proposed rule to grant certain credit unions the ability to issue subordinated debt.