D.C. League Asks NCUA to Issue Preemption Letter from D.C. Predatory Lending Law

ALEXANDRIA, Va. -Asserting that Congressional review of the District of Columbia’s Home Loan Protection Act of 2002, as required by the District’s Home Rule law, does not place the Act beyond the scope of the NCUA’s preemptive powers, the D.C. Credit Union League has asked NCUA Chairman Dennis Dollar to issue a letter the league said would allow them to “avoid unnecessary compliance” with the District’s predatory lending law, which became effective Jan. 28. Banks and thrifts are exempted from compliance with the Act because they’re regulated by federal agencies and because, wrote Senior Vice President Edwin Wills in the League’s Jan. 27th letter to Dollar “of their regulation and duty to comply, as federal credit unions must, with the federal Home Owners Equity Protection Act (HOEPA). However, Wills stated, “the efforts to achieve parity with the national banks and other federally regulated financial institutions, to date, has been unsuccessful,” despite a letter Dollar wrote to Sharon Ambrose, chair of the D.C. City Council’s committee on Consumer and Regulatory Affairs that explained that “credit unions were regulated in a manner consistent with other banking agencies.” Consequently, the new law that went in to effect Jan. 28 directly impacts federal credit union home mortgage lending in D.C. There are more than 70 federally chartered CUs based in the District of Columbia serving more than 429,000 members. The District does not have a state credit union act. Among the practices included in the Act are: * making a covered loan if the borrower cannot be expected to make scheduled payments; * restrictions on the financing of single-premium credit insurance; * restrictions on financing origination/discount points and fees; * no encouragement of default; * unfair steering or improper use of credit scores; * failing to report favorable payment record; * no increase in interest rate on default; * prepayment premium, fee or charge; * limitations on balloon payments. Wills said the Act “has the laudable goal of preventing predatory lending by requiring certain disclosures and preventing specific terms and conditions in loan agreements secured by residential property in the District of Columbia.” However, he said, “There is no evidence that any credit union lending in the District of Columbia has engaged in any acts which would be deemed `predatory’ under the Act.” Wills reminded Dollar that NCUA has in recent months formally taken the position that attempts in Georgia, North Carolina, Connecticut and California to regulate the terms and conditions of loans made by federal credit unions were preempted. “It is our belief that provisions of the District of Columbia’s Act limiting or otherwise prohibiting rates, terms and conditions of federal credit union loans should also be preempted,” Wills wrote. In conclusion, Wills stated that, “The regulatory scheme for Federal Credit Unions is so comprehensive that we do not think it was intended that the Congress’ oversight of the District’s Home Rule was intended to or in fact did modify or supplant the authority conferred on NCUA to authorize rates, terms and conditions of loans by Federal Credit Unions made in the District.” -