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National Credit Union Administration (NCUA)
Agencies Issue Final Rule to Help Ensure Credibility and Integrity of Automated Valuation Models
The NCUA and other federal financial institution regulators issued the final rule to implement the Dodd-Frank Act quality control standards for automated valuation models (AVMs). Under the final rule, the agencies will require institutions that engage in certain transactions secured by a consumer’s principal dwelling to adopt policies, practices, procedures, and control systems designed to:
NCUA Board Maintains Federal Credit Union Loan Interest Rate Ceiling at 18 Percent
The NCUA Board unanimously approved maintaining the current 18-percent interest rate ceiling for loans made by federal credit unions for a new 18-month period from September 11, 2024, through March 10, 2026. The Federal Credit Union Act caps the interest rate on federal credit union loans at 15 percent; however, the NCUA Board has the discretion to raise that limit for 18-month periods if interest-rate levels could threaten the safety and soundness of individual credit unions. The 18-percent cap applies to all federal credit union lending, except originations made under NCUA’s payday alternative loan program, which are capped at 28 percent.
NCUA Board Approves Proposed Incentive-based Compensation Rule
The NCUA along with the other federal financial institution regulators issued a proposed rule to implement section 956 of the Dodd-Frank Act. The statute requires the federal regulators to jointly issue regulation or guidelines to:
NCUA Board Approves Revised Proposal on Succession Planning
The NCUA Board approved a proposed rule which requires boards of directors at federally insured credit unions to establish and adhere to processes for succession planning. This new proposed rule modifies the 2022 proposal based on the public comments received and upon further consideration of the issues. Under the revised proposal, boards of directors at federally insured credit unions would be required to establish written succession plans that address specified executive and other positions. Additionally, each board of directors would be required to review the succession plan in accordance with a schedule it establishes, but no less than annually. The plan would be required to address the credit union’s strategy for recruiting candidates to assume each of the key positions and promote the credit union’s safe and sound operation.
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Consumer Financial Protection Bureau (CFPB)
Data Spotlight: Developments in the Paycheck Advance Market
The CFPB issued a Data Spotlight report on earned wage products which are described as third-party products that tie funding amounts to accrued or estimated wages and that are repayable on the next payday or withheld from the next paycheck. The spotlight summarizes data obtained from eight providers to better understand the size of the market, usage patterns, and fee structures. Some of the key findings include:
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The average transaction size is relatively small. Across providers in our sample of employer-partnered firms the average transaction amount ranged from $35 to $200, with an overall average transaction size of $106. The average worker accessed $3,000 in funds per year.
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When employers do not cover the cost, nearly all workers paid a fee for expedited access to their funds. Across our sample of surveyed companies, in 2021 and 2022, roughly 90% of workers paid at least one earned wage product-related fee. Among the companies in our sample that collect fees, the average cost per transaction ranged from $0.61 to $4.70. When workers paid a fee, the average size was approximately $3.18. Workers paid an average of $68.88 per year in fees.
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Based on the average data inputs in our sample, an illustrative annual percentage rate (APR) for a typical employer-partnered earned wage product transaction equates to 109.5%. As actual APRs will vary depending on transaction size, fees paid, and duration, this APR estimate understates APRs for smaller transactions with shorter terms.
CFPB Proposes Interpretive Rule to Ensure Workers Know the Costs and Fees of Paycheck Advance Products
The CFPB issued a proposed interpretive rule explaining that many paycheck advance products, sometimes marketed as “earned wage” products, are consumer loans subject to the Truth in Lending Act. The guidance will ensure that lenders understand their legal obligations to disclose the costs and fees of these credit products to workers. The proposed interpretive rule explains how existing law applies to this emerging product market and replaces a 2020 advisory opinion that addressed a very specific paycheck advance product that is not common in the real market. The proposed interpretive rule makes clear that many paycheck advance products – whether provided through employer partnerships or marketed directly to borrowers – trigger obligations under the federal Truth in Lending Act. In addition, the CFPB’s proposed interpretive rule makes clear that:
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Borrowers must receive key disclosures: Among other requirements, earned wage lenders must provide workers with appropriate disclosures about the finance charges. Clear disclosures help borrowers understand and compare loan options, sharpens price competition, and ultimately benefits companies that offer competitive products.
Final Interagency Guidance on Reconsiderations of Value for Residential Real Estate Valuations
The CFPB and other federal financial institution regulators released a final interagency guidance addressing reconsiderations of value (ROVs) for residential real estate transactions. The guidance advises on policies and procedures that financial institutions may implement to allow consumers to provide financial institutions with information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal.
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Financial Crimes Enforcement Network (FinCEN)
FinCEN, OFAC, and FBI Joint Notice on Timeshare Fraud Associated with Mexico-Based Transnational Criminal Organizations
FinCEN, OFAC, and the FBI issued a joint notice to financial institutions urging them to be vigilant in detecting, identifying, and reporting timeshare fraud perpetrated by Mexico-based transnational criminal organizations (TCO). The alert provides financial institutions with methodologies, financial typologies, and red flags associated with timeshare fraud being orchestrated by Mexico-based TCOs. Mexico-based TCOs such as the Jalisco New Generation Cartel (CJNG) are increasingly targeting U.S. owners of timeshares in Mexico through complex and often yearslong telemarketing, impersonation, and advance fee schemes. They use the illicit proceeds to diversify their revenue streams and finance other criminal activities, including the manufacturing and trafficking of illicit fentanyl and other synthetic drugs into the United States.
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