UDAP enforcement expansion without safeguards could create redundant CU regulation

CUNA supports the intent of the Federal Housing Finance Agency’s proposal on requirements governing its fair lending oversight and Enterprise Equitable Housing Finance plans, but offered several changes in comments filed Monday. The NPRM asked several questions about potential issues with requiring the regulated entities, which include Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBanks), to comply with the proposed unfair or deceptive acts or practices (UDAP) prohibitions in the Federal Trade Commission Act.

Credit unions have expressed concerns over proposed UDAP enforcement over regulated entities to the extent it could create more indirect oversight of credit unions.

“Credit unions are highly regulated institutions, and their compliance with UDAP and other consumer protection requirements are subject to the supervision of NCUA or the Consumer Financial Protection Bureau (CFPB),” the letter reads. “Supervision and enforcement over the Regulated Entities that could create additional burdens on credit unions and other lenders seeking access to the secondary market or the Regulated Entities’ products and services would be redundant given NCUA or CFPB oversight and make it more difficult for credit unions to access the secondary market or take advantage of the Regulated Entities’ product offerings.”

CUNA added that credit unions have indicated concern with heightened litigation risk, which could make it more difficult for credit unions to access the secondary market or obtain necessary liquidity in the housing finance market.

CUNA encourages the FHFA to finalize the fair lending and fair housing oversight regulation “without codifying the UDAP compliance requirements” the letter reads. “If FHFA, however, determines to move forward with codifying those UDAP compliance requirements, then it should provide guidance to the Regulated Entities specifying the types of conduct that might be implicated by the prohibition against UDAPs described in section 1293.11(b).”

The letter also notes that the Equitable Housing Finance Plan framework might not fit well with FHLBanks because it may be “difficult to determine how aspects of the housing market could be reasonably influenced by an advance, which is primarily how the FHLBanks inject liquidity into the housing finance market.”