FCU Act, NCUA Regs Pre-empt Proposed Texas Law's Application to FCUs

ALEXANDRIA, Va. – NCUA Associate General Council Sheila Albin has clarified to the Texas Credit Union League that the Federal Credit Union Act and NCUA's regulations would pre-empt the application to federal credit unions a proposed law under consideration in the Texas legislature that would provide relief on consumer debt owed by military personnel called to active duty. Responding to an inquiry from TCUL Associate General Counsel Suzanne Yashewski concerning the application of H.B. 1853 to federal credit unions, Albin stated that "the effect of the proposed law would be to regulate the terms and conditions of lending by FCUs." She noted, however, that "FCUs, must comply with the provisions of the Servicemembers Civil Relief Act (SCRA), a federal law providing many protections that parallel those in H.B. 1853." "While 1853 would provide relief similar to the SCRA, there are differences between the two. In some instances, the relief provided by H.B. 1853 is more generous to military personnel, and therefore, more burdensome to FCUs," Albin stated. According to the NCUA associate general counsel, NCUA's lending regulation "expressly preempts state laws affecting the terms and conditions of lending by FCUs." Albin clarified that "the Board does not intend to pre-empt state laws that do not affect the rates, terms of repayment and other conditions described above regarding FCU loans and lines of credit to members." She cited by example of laws that are not pre-empted by federal regulations insurance laws, laws related to transfer of and security interests in real and personal property, conditions related to collection costs and attorneys' fees, requirements that consumer lending documents be in plain language, and the circumstances a borrower can be declared in default and may cure a default. "H.B. 1853 has provisions different from those in the SCRA that, if enacted, would affect the rates of interest and terms of repayment of FCU loans to members eligible under the bill.," and therefore is pre-empted by NCUA regulations.