WASHINGTON - The issue seemed to come from nowhere at the NCUA Board's special meeting May 8 but gathered strength once NCUA Board Chairman Norman D'Amours framed his position on the obscure privacy provision in terms of the Democratic Party's combative stance on consumer privacy protections. D'Amours' statement was the first out of the box at the special session-called to pass NCUA's final privacy rule before the May 12 deadline-but, in its sheer elegance in isolating an item that alone could safely tweak the rule to higher Democratic standards, D'Amours had the last word in starting a process that ultimately left the otherwise pleased CU trade associations clamoring for the item's repeal. And repeal of the D'Amours amendment that requires privacy and "opt-out" notices for co-signers and guarantors of CU loans is what they may get, as NCUA Board member Dennis Dollar has already placed such a proposal on the June 6 board agenda. "This is not the rule that I would have written had I lingering congressional authority-being an `opt-in' advocate personally-in order to properly protect the rights of consumers' privacy...," D'Amours had said. "We're saying that this is a final rule, and, quite frankly, I get a sense that it may not be. I'm aware that as recently as the last few days Congressman LaFalce has introduced another bill dealing with...sharing this information with contractors....So, I guess this is a work-in-progress, and I note that the administration has weighed in very recently, saying that, as far as they're concerned...they're going to continue to support efforts to improve upon the privacy rights of individuals, going beyond what Congress has thus far sought to provide, and I applaud those efforts...." "There is one area...," D'Amours continued, "that I am somewhat concerned about....I find it difficult to understand that the group working this (rule) refused to distinguish (among) makers, co-signers, and co-makers of loans on the basis that such distinctions weren't made for purposes of Reg B and Reg Z (Federal Reserve Board regulations that the NCUA privacy rule working group used to exempt FICUs from notifying loan co-makers and guarantors of their "opt out" and privacy rights)....If anybody's ever co-made or co-signed for a note, you know they require enormous amounts of financial information...." "I think we could make a distinction for credit unions in that regard that would not be hard to do, and hopefully that the other financial regulators, when they get around to their final rule, could emulate. But even if they didn't, I don't believe that this change would render us incomparable overall with their action. I am not going to push that unless some other member of the board would express a similar interest....If somebody would share that interest, I think that that is change we could make that would be beneficial to co-makers and co-signers...." Then with NCUA Board member Dennis Dollar's favorable comments on the unamended draft final rule intervening, NCUA Board member Yolanda Wheat-who had been unaware of D'Amours' position on the co-maker privacy provision-one-upped D'Amours in her skepticism about the rule before them. Eventually tipping her hand that she planned to vote against a rule that statutorily had to be passed by May 12, Wheat said, "We, as regulators, have an obligation to make sure that the choice to `opt out' clearly protects the consumers right to privacy...." "Moreover, I think that the issue of privacy is not merely consumer protection. It's not about this regulation today. In the large scheme of things it's about trust. And credit unions have worked too long and too hard to have the trust that their members have in them eroded by the issue of privacy...." "The issue of privacy," Wheat continued, after scoring the draft rule in both the privacy protection department and in enforcement provisions, "should not be viewed by financial institutions as a regulatory burden. We're talking about a fundamental right of privacy. That is not a burden." With that, D'Amours quickly asked staff if an impromptu amendment could be crafted to close the co-maker/guarantor loophole; and then, as the floor reverted to Dollar, he could be seen locked in an unlikely huddle with Wheat, presumably over the wording of an amendment. "Many data processing systems that are used by credit unions....," Dollar objected, trying to head off the amendment, "do not incorporate co-maker/guarantor information into the data base...." "I think that what we may be doing here," he continued, "in a well-intentioned attempt to cover the privacy rights of the co-signers, is truly...invoking a burden....And so I think that there is a reason why the other financial regulatory agencies did not choose to include this, and I think we ought to stay in (line) with them." Dollar, however, was rebuffed, and D'Amours' amendment requiring privacy and "opt out" policy notification to co-makers, co-signers, and guarantors of FICU loans received the support of Wheat over Dollar's dissent. In final passage, however, only Dollar and D'Amours voted for the rule. "...I am writing to express our strong opposition to the action taken by the NCUA Board today regarding the privacy rule....," fumed CUNA President Dan Mica in a May 8 letter to D'Amours asking him to withdraw his his amendment. "Section 504 of the Act (authorizing the privacy rule) requires all financial institution regulators to issue privacy rules and requires the regulators to `consult and coordinate with the other such agencies and authorities for the purposes of assuring...that the regulations prescribed by each such agency and authority are consistent and comparable with the regulations prescribed by the other such agencies....'" "We believe that the action taken by the Board today violates Section 504 of the Act because the action was taken without consultation with the other agencies...." "If the other agencies do not adopt NCUA's approach, then credit unions will be the only financial institutions that will be required to provide notices to co-borrowers and guarantors. There is simply no legitimate reason for credit unions to be singled out in this area...." "Credit unions either do not have this information or if they do, it is not in a form that is easily retrievable. The cost to collect and retrieve this information will be exorbitant." NAFCU and NASCUS has also expressed concern over the D'Amours amendment, and both the Federal Reserve and the Federal Deposit Insurance Corporation Boards declined in their privacy rule meetings May 10 to follow NCUA's lead. -
gmcorrigan@mindspring.com
