From Regulation B to Regulation Z and beyond, the ConsumerFinancial Protection Bureau inherited a number of regs from sevendifferent agencies. In doing so, the CFPB has made it a priority tostreamline regulations by updating, modifying and even eliminatingsome provisions.

To that end, the CFPB has issued several requests for comments.Twenty-nine have already closed and nine remain open. Following isa summary of the top four CFPB non-lending regulatory issues theagency has addressed that are the biggest concern for credit unions.

Remittances

Probably the most troubling non-lending regulation proposal tocome from the CFPB so far concerns remittances and a host of newdisclosures that will go into effect in January 2013. The proposedregs are so limiting and burdensome, both CUNA and NAFCU havewarned that if enforced as currently written, credit unions couldstop providing the service to members. The CFPB asked for commenton the proposed rules, but the April 9 deadline has alreadypassed.

Credit unions are at a disadvantage because the new disclosuresand limitations would be difficult to control for institutions thatuse so-called open networks, like international wires and ACH, compared to companies like WesternUnion that use their own networks. Credit unions don't have easyaccess through open networks to all the information required tomeet the regulations, wrote NAFCU President/CEO Fred Becker.

Proposed disclosures include an estimate of exchange rates andfees when a prescheduled transaction is originally authorized, asecond receipt 10 days before the transaction will take place and athird and final receipt when the transfer is received. The goal isto allow consumers to comparison shop. However, Becker said therule would require massive reconfiguration of the way remittancesare offered and would be an inefficient use of resources for creditunions. And, he said, credit unions would have a difficult timemanaging exchange rate risk for 10 days.

The CFPB also proposes allowing consumers to cancel atransaction up to three days before it is scheduled, afterreceiving cost and exchange rate estimates.

CUNA Senior Vice President and Deputy General Counsel Mary Dunnsaid the rule would impose unsustainably high compliance costs andlegal liabilities for credit unions. Furthermore, if credit unionsare forced to discontinue the service due to regulatory burdens, itwould result in increased fees for consumers and fewer choices.

Both organizations also agree that multiple disclosures forpreauthorized remittances would be overkill for consumers whileincreasing compliance costs.

To provide safe harbor to credit unions, both trades proposeraising the CFPB's current threshold of 25 transactions per year.NAFCU suggests raising the number to 600, while CUNA suggestedexcluding organizations that receive less than 30% of their totalnet income from remittance transactions.

Overdraft Protection

In February, the CFPB issued a request for comment regardingoverdraft programs. In particular, the agency asked for informationregarding the impact of opt-in regulations, alternatives tooverdraft programs and low- or negative-balance alerts toconsumers.

The deadline for comment is April 30, but CUNA asked the bureauto grant an extension of the comment period. As of press time, theCFPB had not responded to the request, but Dunn said she'soptimistic the CFPB will grant the extension.

“It's such an important issue for credit unions,” Dunn said. “Anumber of credit unions offer a range of products to members foroverdraft protection, so we want the agency to have goodinformation.”

CUNA Mutual Compliance Manager Lauren Calhoun said the bureau isattempting to balance getting enough information to consumers withavoiding regulatory burden on financial institutions. She said theCFPB is also seeking comment on a model statement that disclosesoverdraft fees assessed each month in a penalty box format and alsoprovides a link for consumers to learn more about how to avoidoverdraft fees.

The CFPB's approach to statement disclosures mimics the tabularformat proposed as part of the “Know Before You Owe” initiative,Calhoun said, which aims to increase consumer knowledge of creditcard, mortgage and student loan programs.

Payday Lending

The comment period for payday lending ended April 23, and although credit unions don'tengage in the type of predatory lending the CFPB is targeting,Calhoun urged credit unions to stay abreast of the CFPB'smoves.

“There's some indication NCUA will take [CFPB's] lead on thisissue,” she said. “We know it's a topic that will come up laterthis year.”

The current credit union short-term lending model is consistentwith the bureau's objectives of protecting consumers from predatorypayday lending, said Assistant General Counsel Luke Martone inCUNA's letter to CFPB on the issue.

The NCUA's Short-term, small amount loan program was held up byCUNA as a model for responsible payday lending. The programrestricts credit unions to principal amounts between $200 and$1,000, maximum six-month terms, application fees of $20 or less,and a restriction against rolling over the loan.

State-chartered credit unions are not eligible for the program,but many offer similar programs, such as Listerhill's Better Choiceloan option, which provides short-term loans for between $250 and$500 with an 18% APR and 30-day repayment term and also do notpermit roll-overs.

Rulemaking

CUNA Mutual Director of Compliance Bill Klewin said one CFPBchange that will require credit unions to adjust is the way theagency approaches rulemaking. The bureau seeks early consumer andindustry feedback, and even though CFPB gives institutions anopportunity to provide official comments, he said credit unionsshould get involved earlier in the comment process.

NAFCU Director of Regulatory Compliance Steve Van Beek agreed,saying he thinks credit unions are getting used to CFPB's differentapproach but added all institutions are often taken by surprisewhen CFPB Director Richard Cordray announces potential rule changesduring speeches.

“Part of the challenge is that the CFPB doesn't have regularboard meetings,” Van Beek said. “You can't plan your week as acompliance officer when something new can drop at any moment.”