CFPB should increase relief in 'rural' definition rule: CUNA

March 30, 2015
WASHINGTON (3/31/15)--The Consumer Financial Protection Bureau's (CFPB) proposal regarding rural and underserved areas is a positive step, but CUNA urged the agency to take further regulatory relief steps, in a comment letter filed Monday.

The CFPB in January 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, in part, 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.

CUNA generally supports the proposal, calling the bureau's overall approach "positive and appreciated."
However, CUNA offered a number of changes to make the proposal more favorable toward credit unions and other small servicers.
This includes providing favorable regulatory relief to creditors that manage their lending programs, in addition to the thresholds of asset size and loans originated. This could be achieved by considering the default rates on covered loans, CUNA suggests.
CUNA also recommends the small creditor thresholds, which can exempt institutions from certain requirements under Regulation Z (which implements the Truth in Lending Act), be analyzed. The new threshold proposed by the CFPB would raise the thresholds to 2,000 loans originated in a year, up from 500.
"Raising the limit is commendable but we encourage the agency to provide impact analyses that demonstrate how communities, consumers and creditors would be affected if the limit were raised to 2,500, 3,000, 3,500 or 4,000 as well as the proposed threshold of 2,000 so that stakeholders and the agency would have more informed comments regarding what the new limit should be," the letter reads.
The CFPB's proposal would not raise the asset limit for small creditors, which is currently set at $2 billion. CUNA believes the number is arbitrary and too low, and urges the bureau to consider raising the threshold to $10 billion.
CUNA supports most other aspects of the proposal, including:
  • Adding a grace period to the annual asset limit and original limit to allow a creditor that exceeds those limits to operate as a small creditor for loan applications received before April 1 of the current calendar year;
  • Expanding the definition of "rural" to include a county that meets the current definition of a rural county or a census block that is not in an urban area as defined by the U.S. Census Bureau; and
  • The inclusion of safe harbor provisions for creditors related to the use of CFPB tools to determine whether a property is located in rural or underserved areas and to determine if a property is located in an urban area.