The National Credit Union Administration (NCUA) has issued a regulatory alert to federally insured credit unions regarding recent amendments to the CFPB’s 2013 Mortgage Servicing Rule, issued on August 4, 2016, and the Bureau’s FDCPA interpretive rule concerning safe harbors from FDCPA liability. The recent amendments to the Mortgage Servicing Rule clarify (i) Regulation X (RESPA) provisions regarding force-placed insurance notices, mortgage servicing policies and procedures, early intervention, and loss mitigation requirements, and (ii) Regulation Z (TILA) provisions regarding prompt payment crediting and periodic statement requirements. The FDCPA interpretive rule provides safe harbor for servicers acting in compliance with specified mortgage servicing rules set forth in Regulations X and Z.
On February 8, the National Credit Union Administration (NCUA) published a notice of proposed rulemaking to expand the types of investment capital that federally insured credit unions could use to meet certain regulatory requirements. NCUA is considering whether to allow credit unions to use investment capital (that would be uninsured capital subordinate to all other claims) to satisfy the risk-based net worth ratio requirement. Currently, only low-income designated credit unions are allowed to use secondary capital to satisfy two regulatory requirements: the net worth ratio and the risk-based net-worth ratio. Although any changes to the definition of net worth would require an act of Congress, the NCUA asserted in the proposal that it has broad authority to adjust the risk-based net worth ratio requirement and therefore may choose to allow credit unions that are not “low-income designated” to use alternative capital to meet this requirement.
On January 24, the U.S. District Court for the Eastern District of Virginia issued an order dismissing a suit seeking to overturn a rule that allows federally regulated credit unions to expand their business lending activities. The complaint, filed in September 2016, claimed the NCUA exceeded the plain language of its statutory authority by permitting such business lending activities The bank trade group further alleged that because credit unions are tax-exempt, they offer commercial loans at a lower price than the trade group’s community bank members, resulting in injury to those institutions. The court, however, stated that the bank trade group failed to prove its claim or show that injury was caused to its members. “Merely codifying an extant rule in part of a new regulation does not effectuate a reopening. If anything, this reflects the agency’s view that its earlier rule is … settled to the point that it may serve as a foundation for further rule-making,” Judge Cacheris wrote.
On January 25, President Trump appointed J. Mark McWatters as the acting chairman of the National Credit Union Administration (NCUA). McWatters succeeds Rick Metsger, who will remain a NCUA Board Member. McWatters was nominated to the NCUA Board by then-President Barack Obama on January 7, 2014 and took office following Senate confirmation on August 26, 2014. Prior to joining NCUA’s Board, McWatters—a licensed attorney and CPA—worked in a variety of public and private sector roles, including serving on the Governing Board of the Texas Department of Housing and Community Affairs and as a member of the Troubled Asset Relief Program Congressional Oversight Panel. He also served as counsel to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), who, following McWatters’ appointment, issued the following statement:
“I commend President Trump for appointing Mark McWatters to this key position. Mark is highly capable and extremely well qualified for this role. He brought a free market-oriented, transparent and accountable perspective to the NCUA Board. At a time when the regulatory burden of the Dodd-Frank Act has led to a drastic decline in the number of credit unions serving Americans, Mark’s leadership as Acting Chairman is greatly needed.”
On December 7, the American Bankers Association (ABA) filed a lawsuit in federal court seeking to overturn a final rule published by the National Credit Union Administration (NCUA) in that morning’s Federal Register. The final rule purports to “implement changes in policy affecting: The definition of a local community, a rural district, and an underserved area; the chartering and expansion of a multiple common bond credit union; the expansion of a single common bond credit union that serves a trade, industry or profession; and the process for applying to charter, or to expand, a federal credit union.”
ABA’s law suit contends, among other things, that by “fail[ing] to adhere to the limitations on federal credit unions established by Congress,” the NCUA’s final rule “upsets the balance Congress struck between granting federal credit unions tax-favored status and limiting their operations to carefully circumscribed groups or localities that share a common bond.” Under the final rule, scheduled to take effect Feb. 6, Federal Credit Unions (FCUs) can apply to serve entire geographic regions, so-called “rural districts” up to 1 million people (which include the entirety of Alaska, North Dakota, South Dakota, Vermont or Wyoming), and areas contiguous to their existing service areas. NCUA is also facilitating easier conversions to community charters.