This week, more than 50 Cornerstone-member credit union leaders and advocates spoke with Consumer Financial Protection Bureau Director Rohit Chopra. Discussion topics included auto loans, overdraft protection programs, rulemaking, and ways to engage with the CFPB.
Chopra opened with a brief on the economic climate, CFPB priorities, and recent efforts to open a dialogue with credit unions to get a first-hand account of the credit union landscape.
Chopra praised credit unions for stepping up to help their members take on larger debt burdens amid a tight economy.
“While the labor market continues to be pretty strong, we have not really been in an inflationary cycle in a long time,” he said. “That means a lot of our businesses and consumers don’t really have a prior reference. I’m seeing lots of issues in auto lending. We see a lot of credit unions stepping up to help their members as they take on larger debt burdens.”
Chopra said that the rapidly changing payments landscape, particularly Google and Apple Pay, is changing the way consumers engage with money, which presents challenges, especially for smaller financial institutions. The challenges have contributed to a shift from relationship banking toward algorithm banking, which can have detrimental effects on consumers.
“I’m interested in restoring and safeguarding relationship banking,” Chopra said. “I encourage everyone to reflect and ask themselves, ‘What are we doing now as a community that’s working?’”
He also encouraged credit unions to make auto loans to initiate further conversations. “Auto lending is a great asset for a credit union,” he said. “It’s also a great way to create a relationship with someone. An initial conversation about auto loans can turn into a larger conversation about financial health.”
Chopra encouraged credit union executives to look at the percentage of income they’re generating from overdraft and NSF fees, in relation to industry standards, and compared with their peers.
“The ones who are most dependent on that income are the ones who will experience the greatest challenges,” he said.
He also encouraged credit unions to ask themselves why they are dependent on that income and consider member feedback.
“What are you hearing from your members?” he asked. “Are you treating your overdraft program as a service or a penalty?”
Chopra challenged attendees to consider the difference between overdraft and NSF. “NSF isn’t really a service,” he said. “Take a look at your practices and customer feedback.”
When it comes to rulemaking, Chopra said, “We are looking at a host of issues, and it’s a complicated rule. We know that it’s going to involve some costs for institutions trying to report the data. We’re working on the contours and hope to get this completed within three to five months.”
Cornerstone League Regulatory and Compliance Counsel Suzanne Yashewski asked Chopra to speak to frustrations caused by P2P program-related fraud.
“With the rise of P2P apps such as PayPal and Venmo, all of a sudden everyone is an authorized biller,” Chopra said. “There are situations where some of those P2P providers don’t have a lot of customer care so when something goes wrong, they go to their financial institution to help out. But they don’t have a lot of visibility into what went wrong. The challenge is there isn’t a clear set of rules on the agreement on the NACHA rules.”
He added, “We need to ask ourselves, ‘What are the common goals that we all have to reduce the number of fraud incidents and how can we put a stop to it as a system?’”
Yashewski expressed the desire for credit union advocates to participate in the rulemaking process. “When a regulator issues a rule, sometimes credit unions take it as law,” she said.
Chopra said he wants to be transparent. “It’s important for the CFPB to issue advisories and field questions so we’re saying to the industry, ‘Here’s where we are, and here’s our interpretation.’ If entities disagree with that, that is something they can contest. We want to be transparent about what the law currently covers.”
One attendee asked if the CFPB can get involved with NSF fees that are presented by merchants.
Chopra said he hears about this issue often from credit unions and banks and urged attendees to educate themselves on the details of the ACH system. “There are a lot of industry standards about who gets to use the ACH system. I encourage you to look at the history about who can use this.”
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