WASHINGTON – Consumer Financial Protection Bureau Director Richard Cordray talked up small institution exemptions in new bureau rules during his address at CUNA’s Governmental Affairs Conference Feb. 27.
“There are certain big pieces of our new mortgage rules where the end result may be that most credit unions will be covered by special provisions,” he said after detailing rules that will affect credit unions. “That seems quite appropriate to me since, as we all agree, it was not the traditional lending practices of credit unions that caused the financial crisis.”
Cordray was particularly complimentary of credit unions throughout his speech, going as far as to say that he agrees with industry executives who have told him credit unions were the true consumer protectors long before our agency was even just a twinkle in Elizabeth Warren’s eye.
Credit unions upheld sound underwriting standards at the expense of losing customers and market share to financial predators, he said.
“I know that [the qualified mortgage rule] probably sounds quite foreign to credit unions,” he said. “You typically pay close attention to whether your members can repay the money you lend them.”
The CFPB looked to the credit union relationship lending model when it wrote the QM rule, he said, because the cooperatives find ways to make loans that respond to personal situations and cannot be captured by generic metrics.
Cordray repeated what he told credit union trade associations Feb. 7 during a briefing: qualified mortgage rules aren’t meant to pressure lenders into only making QM loans.
“We understand that some of you–or your boards or lending committees may be initially inclined to lend only within the qualified mortgage space, maybe out of caution about how the regulators would react,” he said. “But you should have confidence in your strong underwriting standards, and you should not be holding back.”
Further, because the credit market is so tight that “lenders are leaving good money on the table by not lending to low-risk applicants,” Cordray said credit unions have a window of opportunity to gain market share during today’s low-rate environment.
In an effort to collect industry feedback, Cordray said in the last six months, CFPB representatives have met with 28 state credit union associations and have visited local credit unions when conducting field hearings across the country. The bureau also created the Credit Union Advisory Council to provide information, analysis and recommendations.
“We want to ensure that we have a consistent way to hear directly from you about what you are seeing and hearing in your communities,” he said. “Because we generally do not supervise credit unions with $10 billion or less in assets–which means that we do not conduct examinations on nearly any of you–the Advisory Council fills this gap in our day-to-day contact."