Dodd-Frank Remains CUNA Priority Two Years in Washington
The Dodd-Frank Act was controversial from the start, and remained so after it was signed into law. The act has been the subject of several House hearings in recent weeks, and legislative changes to the regulation have been discussed by members of Congress. Republican presidential candidate Mitt Romney promises or threatens--depending on one's perspective--to repeal the law if he is elected.
In addition to being controversial, implementation is also complicated with 2,319 pages of law needing to be transformed into rules. Regulators are simply taking more time than was expected to develop Dodd-Frank rules. Portions of the Dodd-Frank Act have not been implemented by their proposed deadlines.
While little in the law directly impacts credit unions, some aspects of the law are already affecting credit unions.
The largest Dodd-Frank issue for credit unions and CUNA remains the Federal Reserve's debit interchange fee cap. The debit interchange fee cap regulations, which became effective last fall, limit debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allow an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards.
While the debit interchange fee limits are only meant to apply to credit unions with more than $10 billion in assets, CUNA recently said the "jury is still out" on how effective this exemption has been. CUNA also continues to monitor whether credit unions suffer any negative impact as a result of merchants steering customers toward lower-fee cards. CUNA set up a site last fall to allow credit unions to report any such abuses.
The Federal Reserve in a survey released this spring reported that the average interchange fee received by credit unions and other debit card issuers that are exempt from the debit interchange fee cap was 43 cents per transaction in 2011. The average interchange fee charged by financial institutions that were subject to the cap during that same time period was far lower, totaling 24 cents per transaction, the Fed said.
CUNA has noted that credit unions continue to be concerned that market forces will ultimately drive down the fees that the exemption for smaller institutions is intended to protect.
The Consumer Financial Protection Bureau (CFPB), which was created as a result of the Dodd-Frank Act, has taken over many consumer-oriented regulatory tasks from other federal regulators in the two years since the law was passed.
One CFPB project that could have a substantial impact on credit unions is the CFPB's final remittance transfer rule, which is scheduled to come into effect on Feb. 7, 2013. Under the rule, remittance transfer providers would be required to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes.
CUNA has warned that the remittance regulation "will significantly diminish the availability of international transfer services and increase the cost of such services for consumers." A "safe harbor" that would shield smaller institutions that process low volumes of remittance transfers from the pending regulation has been proposed, and could be finalized this summer.
The CFPB initially proposed a safe harbor cap of 25 or fewer transfers per year. CUNA has suggested a minimum safe harbor cap of 1,000 transfers.
The final safe harbor cap will likely be higher than 25, but unfortunately much lower than 1000, CUNA Director of Compliance Information Valerie Moss said.
The agency's highest profile project as of late has been a comprehensive re-working of mortgage application and closing documents, and related rules. The mortgage document changes and rules that implement those changes were released for public comment earlier this month, and CUNA continues to review the 1,099-page CFPB mortgage proposal.
For now, CUNA is concerned with portions of the proposal that would expand Regulation Z's definition of "finance charge" and sections that address settlement disclosure timing. The CFPB has claimed that the mortgage changes would not increase the cost of mortgage lending, but CUNA has countered this argument, noting that "a dollar spent on regulatory compliance is a dollar diverted from lending."
New ability-to-repay regulations were expected to be finalized by the CFPB by mid-2012, but those rules have been postponed until after the November election. The agency has also postponed the release of a final definition of "qualified mortgage" until that time.
Other near-term CFPB projects include rulemakings on expedited funds, private student lending regulations, deposit/share account insurance disclosures for non-federally insured financial institutions, and various rules that were transferred to the agency, such as the Home Mortgage Disclosure Act, Equal Credit Opportunity Act and Requirements for Prepaid Cards.
The CFPB is also examining how it could streamline existing regulations that are now under its purview.
Overall, CUNA continues to urge the CFPB to consider exempting credit unions from agency rulemakings. "While the CFPB has been tasked by Congress to implement 18 laws and assume other duties, the agency was also given broad authority to minimize the compliance burdens of its rules on entities such as credit unions," CUNA Deputy General Counsel Mary Dunn said in a June comment letter to the CFPB. "The role of the CFPB in alleviating compliance burdens for institutions that are already heavily regulated is as important as its responsibility to develop and implement regulations for entities that, prior to the establishment of the CFPB, escaped meaningful government oversight," she added.