WASHINGTON (3/9/15)--CUNA has written to Reps. Andy Barr (R-Ky.) and Ruben Hinojosa (D-Texas) to express support for a bill that would direct the Consumer Financial Protection Bureau (CFPB) to establish a process to determine if an area can be defined as "rural."
The Helping Expand Lending Practices in Rural Communities Act (H.R. 1259) was introduced Wednesday.
"The CFPB has reexamined the definition of 'rural' and has a proposal out for comment," wrote Jim Nussle, president/CEO of CUNA. "However, H.R. 1259 is welcomed because it would allow a person who lives in or does business in a state, to apply to the CFPB to have designated an area in which the business is located as a rural area for purposes of a Federal consumer financial law."
A designation of "rural" by the CFPB has many implications for credit unions, particularly with respect to the type of products credit unions may offer their members in these areas.
For instance, the escrow requirements under the Truth in Lending Act (TILA) requires certain lenders to create an escrow account for at least five years for higher-priced mortgage loans. If those loans are made by small lenders that operate predominately in rural or underserved counties, they are exempt from this requirement.
Another example includes the Ability-to-Repay and Qualified Mortgage (QM) standards under the TILA rule by which mortgage loans with balloon payments do not meet the QM standard. Like the escrow rule, small lenders that operate predominately in rural areas are eligible to originate balloon-payment QMs.
The CFPB has defined "rural" by using the U.S. Department of Agriculture Economic Research Services' urban influence codes.