CUNA-backed bill would allow CU input into 'rural' definition

March 4, 2015

WASHINGTON (3/5/15)--Reps. Andy Barr (R-Ky.) and Ruben Hinojosa (D-Texas) have reintroduced the Helping Expand Lending Practices in Rural Communities Act, a CUNA-supported bill that would grant credit unions and other lenders greater input into rural-area designations.

"Having an area designated as 'rural' can affect  the types of products credit unions can offer members in that area, and CUNA supports any opportunity for credit unions to provide input to the process," said CUNA Chief Advocacy Officer Ryan Donovan.

For instance, credit unions operating in "rural" areas may be exempt for some regulatory burdens, such as an escrow requirements under the Truth in Lending Act that requires certain lenders to create an escrow account for at least five years for higher-priced mortgage loans. They may also be exempt from standards under the Ability-to-Repay/Qualified Mortgage (QM) rules that disqualify mortgage loans with balloon payments from meeting the QM standard.

Being exempt from such requirements, CUNA maintains, can beneficially affect the types of products a credit union can offer their members in what can be underserved areas.

The "rural " designations are made by the Consumer Financial Protection Bureau (CFPB), and the bill would provide individuals in rural areas the right to petition for the area to be reclassified as "rural." It would also direct the bureau to establish an application process determining whether an area should be designated as rural.

Currently, the bureau uses the U.S. Department of Agriculture codes to define a rural area.

The bill also requires the CFPB to grant or deny the application within 90 days and to publish the decision in the Federal Register. The decision must include an explanation of factors the bureau used in making its decision.