Both NCUA Chairman Debbie Matz and Consumer Financial Protection Bureau Director Richard Cordray revealed developments in ongoing regulatory issues during a Feb. 5 webinar in which both answered questions from their credit union audience.
Cordray said that the CFPB will not consider increasing its remittance exemption above 100 transactions per year before the rule is finalized. When answering an audience question, he said the CFPB was required by the Dodd-Frank Act, in writing the remittance rule, to determine how many remittances per year would constitute a “normal course of business.” The agency determined that number to be 100 per year. To increase that threshold because credit unions don’t like the rule–not because they do less business than a ‘normal course of business’–wouldn’t jibe with Dodd-Frank’s mandate, he added.
“We are not in the active rule- making process on that issue at this time,” he said.
Cordray also said he expects the remittance rule to be finalized in February or March, and implemented 90 days later. So, he said, credit unions can expect to comply with the rule by May or June.
He also addressed the CFPB’s proposed APR calculation rule, saying the bureau has received so many comments opposing the rule, introduced July 9, 2012, that would require fees and closing costs to be included in mortgage APR calculations, it decided to shelve the proposal until later this year.
However, the APR rule is mandated by Congress per the Dodd-Frank Act, so the bureau is “trying to decide how to handle that.”
Cordray said that he anticipates the bureau will reconsider the proposal later this year when it releases final rules regarding the integration of TILA and RESPA disclosures. Neither the APR rule or disclosure integration were required by Congress to be finalized by January 2013, so the bureau has time to continue crafting the remaining mortgage rules, he said.
Cordray added that the CFPB is working closely with the NCUA and other regulators to prepare exam materials for examiners and institutions regarding new mortgage regulations finalized thus far.
“They will signal our approach toward examinations and help us be consistent among all entities that do mortgage lending,” he said.
The CFPB is also working to provide additional information regarding the plethora of rules it has issued in the last year. Cordray admitted the rules, which are in some cases nearly 1,000 pages long, “aren’t the most readable in the world” but had to be written in legalese to avoid court challenges.
“We’re trying to translate those into plain English and will have the docs out fairly soon,” he said.
The CFPB director also clarified that the bureau will only conduct examinations of credit unions with more than $10 billion in assets. The NCUA will examine credit unions smaller than $10 billion–the overwhelming majority of the industry–to ensure compliance with CFPB regs.
Matz made some new announcements of her own. She said that the agency will introduce a proposed rule on credit union use of derivatives during the first half of 2013. The regulator first requested comment on the topic in June 2011 and sought further input with a formal 60-day comment period in January 2012.
“The staff has worked closely with a credit union community working group. This issue is so very complicated, and we want to get it right,” Matz said during the webinar.
Matz said the NCUA will consider allowing credit unions with the appropriate expertise in derivatives to use the tool to hedge against interest rate risk.
Director of Examination and Insurance Larry Fazio responded to a question regarding the NCUA’s exam expectations for applying enterprise-risk management practices. He said the division is anticipating producing a supervisory letter to be used by both examiners and credit unions defining the NCUA’s interpretation of ERM.
“It’s sort of a new discipline, there’s no universally accepted definition for it,” Fazio said.
Sometime during the first six months of 2013, Fazio said the NCUA will specify its ERM expectations, what credit unions need to do and how to do it.