Credit union trade groups are giving cautious support to the CFPB's proposal to allow companies to find innovative ways to provide consumers with required disclosures from financial institutions.
While CUNA views the proposal as positive, the trade group "recommends the bureau refrain from an overzealous promotion of innovation that places traditional financial institutions at an unwarranted disadvantage," Alexander Monterrubio CUNA's senior director of advocacy and counsel said in a letter to the agency.
"NAFCU believes that the proposed [policy] improves upon the current process for obtaining a trial disclosure program waiver, which has so far yielded no successful applications," Andrew Morris, the group's regulatory counsel said.
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However, he goes on to ask the bureau to give more careful consideration to the needs of smaller financial institutions.
But consumer groups said that the proposal far exceeds the agency's authority.
"The CFPB has no authority to allow 'trials' that go on for years and years and that allow entire industries to skip important consumer disclosures, such as the total cost of a loan or the required notice that the loan price was marked up due to information on the consumer's credit report," said Lauren Saunders, associate director of the National Consumer Law Center.
The bureau said that in the past, the agency encouraged such innovation, but the constraints included in the application process for approval were so poor that not a single application was approved.
The CFPB is proposing the streamline the application process.
"The Bureau's proposed review will now focus on the quality and persuasiveness of the application, especially the extent to which the trial disclosures are likely to be an improvement over existing disclosures, and the extent to which the testing program mitigates risks to consumers," the agency said.
In his letter, Monterrubio said that any trial disclosure programs must be narrow and not "excessively deviate from traditional regulatory standards regarding disclosure."
He said the bureau must clarify that any financial institution that receives approval for a test is protected from state laws and the CFPB acting under its Unfair, Deceptive or abusive acts or practices powers.
In his letter, Morris said that NAFCU was pleased to see that the agency provided clearer details regarding the application process.
However, he said that the CFPB should consider ways to reduce burdens for smaller financial institutions that may not be able to bear the full cost of complying with the program's requirements.
But in a letter to the agency, 50 consumer groups said that a broad assortment of companies, ranging from payday lenders, check cashers, debt settlement "scammers" as well as traditional financial institutions could use the program to evade proper disclosure.
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