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Michigan Credit Union League

CFPB's Small Creditor Rule Could Have Big Impact on Credit Unions

Gerber FCU President/CEO John Buckley said that while the Consumer Financial Protection Bureau’s new proposed rule impacting small creditors does not affect his credit union, he is sure it is welcome news for those it does.

Still, Buckley thinks the bureau, which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, could go further to help more credit unions.

“I would exempt all member-owned financial institutions by the very nature of their governance as member-owned cooperatives,” said Buckley, who is a member of the CFPB Credit Union Advisory Committee, although he added that he does not speak for the committee. “These exist for the benefit of their membership and should be afforded exemptions for that very fact.”

He added that the proposed rule shows that CFPB is listening. Credit unions have long said they should not be subject to the bureau’s rules because they didn’t cause the economic meltdown that led to the 2007-09 Great Recession. Dodd-Frank was passed in the wake of the recession, which many blame on banks that invested in subprime mortgages.

Under the proposed rule, in order to qualify as a “small creditor,” credit unions would have to originate less than 2,000 first-lien mortgages, up from the current 500. To qualify, credit unions must also have less than $2 billion in assets, including the assets of the creditor’s mortgage-originating affiliates. There are only a few mortgage CUSOs that have affiliate relationships with any Michigan credit unions.

“Responsible lending by community banks and credit unions did not cause the financial crisis and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” CFPB Director Richard Cordray said. “Today’s proposal will help consumers in rural or underserved areas access the mortgage credit they need, while still maintaining these important new consumer protections.”

Michigan has many small credit unions that would be impacted by the changes to the small creditor qualified mortgage exemption. Several small credit unions use the balloon payment qualified mortgage exemption, but if this proposed set of rules is implemented after April 1, 2016, they will no longer be able to offer these products to their members unless they operate predominantly in rural or underserved areas.

The proposed rule will be open for public comment until March 30. MCUL & Affiliates will prepare a comment letter on the proposal and would like to get input from credit unions. Contact Sarah Stevenson at

The CFPB website has a copy of the report.

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2015-02-02 00:00:00