CFPB proposes broader 'small creditor,' 'rural' area definitions

January 29, 2015

WASHINGTON (1/30/15)--The Consumer Financial Protection Bureau Thursday proposed a broader definition of "small" credit union and bank, as well as an expanded designation for what comprises a "rural" area.

If finalized, the proposal would increase the number of financial institutions able to offer certain types of mortgages in rural and underserved areas by exempting more small creditors from the CFPB's tough new mortgage rules.

In May 2013, the bureau announced it would study whether the definitions of rural and underserved should be adjusted. In May 2014, the bureau requested public comment regarding the origination limit for small creditor status.

The Credit Union National Association strongly backed easing the regulatory burden of the rules for credit unions. Being exempt from some of the provisions of the CFPBs Ability-to-Repay and Qualified Mortgage (QM) rules can beneficially affect the types of products a credit union can offer its members in what can be underserved areas, CUNA has noted.

CUNA President/CEO Jim Nussle said after the CFPB announcement Thursday that the changes are significant.

The CFPB's new proposal would define "small creditor" as one that originates no more than 2,000 first-lien mortgage loans, up from a 500 loan origination limit.

It also would expand the definition of "rural" by adding "census blocks that are not in an urban area as defined by the Census Bureau" to its current description.

Nussle noted, "CUNA fervently advocated to the bureau to take another look at these areas, and we thank them for listening to the concerns of credit unions.  More work still needs to be done, but this is an important step in the right direction.

"We're working with our mortgage lenders and member credit unions to submit a robust comment letter on these proposed changes. The changes announced today will benefit a number of community lenders, including credit unions, across the country. Ultimately, the real winners are communities.  As credit becomes more available, it's the growth of the communities across America that will develop in the long run."

The bureau also proposes a compliance grace periods for creditors that suddenly push past the loan threshold qualifying for the relief. Among other things, the CFPB proposal considers extending small creditors' exemption from limits on balloon-payment loans by about three months, which would bring it to April 2016, among other changes.

Interested parties have until March 30 to comment.