CU Examinations Prove Need for Consumer Protection Exams: Harper at GAC

NCUA Chairman Todd Harper on Tuesday escalated his commitment to strengthen the agency’s consumer protection efforts, saying that lapses found during credit union examinations have demonstrated the need for stronger supervision.

“We observed several issues suggesting that some credit unions may not be paying attention to consumer financial protection as closely as warranted,” Harper told CUNA’s annual Governmental Affairs Conference, held virtually this year.

Harper said that in some cases, examiners found weaknesses in credit union compliance management systems.

“If left unchecked, issues such as deficient recordkeeping, or inadequate training, or weak internal review or audit processes could lead to heightened risks,” he said.

Harper last year pushed for the NCUA to start the process of developing a separate consumer protection examination for credit unions, like ones run by federal banking agencies. However, then-Chairman Rodney Hood opposed the proposal. Board member Kyle Hauptman, a Republican like Hood, was not a member of the board at the time.

Harper said examiners noted “shortfalls” in credit unions complying with the Fair Credit Reporting Act, the Electronic Fund Transfer Act and the Truth in Lending Act.

He said that credit unions with fair credit reporting issues typically did not have written policies about the accurate reporting of member information to a consumer reporting agency.

He said that credit unions with electronic fund transfer problems typically did not promptly investigate errors or provide complete disclosures.

And he said that credit unions with Truth in Lending Act issues typically failed to provide members with accurate disclosures or did not accurately calculate the finance charge for consumer loans.

“To address these and other issues, especially as the industry grows in complexity, the NCUA must create a dedicated program to supervise for compliance with consumer financial protection and fair lending laws,” he said. “In doing so, we will better protect consumers’ interests, ensure that the credit union system lives up to its commitment to serve members, and provide a comparable level of consumer protection oversight as federal bank regulators.”

He continued, “The NCUA’s efforts to enhance oversight of consumer financial protection rules will not only protect credit union members, but also all credit unions from the reputational risks resulting from the missteps of other.”

On another issue, Harper said he has asked Congress to make permanent changes to the agency’s Central Liquidity Facility. Those changes are scheduled to expire at the end of this year.