ACUMA ONpoint
ACUMA ONpoint
Federal Agency Transitions and Their Impact on Credit Unions
What if the credit union mortgage industry is on the cusp of major changes as the political landscape shifts in Washington? Join ACUMA President Peter Benjamin on the next episode of the ONpoint Podcast as we unpack the complexities of the current political climate with our insightful guest, Leah Dempsey, Shareholder from Brownstein Hyatt Farber Schreck. With her expertise, we navigate the anticipated transitions within federal agencies, focusing on the bold moves by CFPB Director Chopra, even amidst congressional pushback, as President Trump gears up to take office. Leah provides an expert roadmap on what industry insiders can expect from these regulatory shifts, including the challenges of unwinding previous rulemaking actions. The episode also tackles the looming transitions at major finance agencies like the FHFA and NCUA.
Tune in for a comprehensive discussion that promises to enhance your understanding of the regulatory landscape and its potential impact on the credit union mortgage sector.
The views and opinions expressed in this podcast do not necessarily reflect the views or positions of Acuma, its board of directors, its management staff or its members. The podcast discussion presented is conversational in nature and for general information only.
Speaker 2:Hello and welcome to Actions On Point Podcast, the policy series where we focus on policy issues impacting the credit union mortgage industry. I'm your host, peter Benjamin, joining us today as our resident expert is Leah Dempsey. Shareholder with Brownstein. Leah, how are you doing today?
Speaker 3:shareholder with Brownstein Leah. How are you doing today? I am doing well. It's the Friday before inauguration in DC, so a busy weekend to come, I think, and probably lots of traffic and crowds.
Speaker 2:Absolutely, absolutely A very cold Friday before inauguration. Now to that point. So here we are, the Friday before the inauguration. We to that point, all right. So here we are, the Friday before inauguration. You know we're sitting down. You know, and we're purposely sitting down before the inauguration because we really want to outline, you know, the things to come. Now this episode is going to air, you know, the 31st Friday, the 31st, and the whole point of this is that we really want to kind of provide a roadmap for our listeners and what they can expect in the weeks, the months ahead. You know, in the new administration, you know possible agency transitions, you know things that could come down the pipe, but also you know, of course, you know there are things that are still actively happening within the government that we want to mention, things that are still actively happening within the government that we want to mention. So if you could, I'll take my normal step back.
Speaker 3:Provide us the latest and greatest that's happening in Washington, sure. Well, next week there's going to be a flurry of activity. There's the changing of political parties, which with that brings a lot of staff transitions. A lot of you know people will be stepping down from political roles at the federal agencies. Some have, notably not stepped down yet. Director Chopra at the CFPB has not yet stepped down. So we will see if that happens over the weekend or if he's asked to step down once President Trump is sworn in. But I'm sorry, sure.
Speaker 2:And I think I probably jumped the gun on this and I apologize for interrupting you to you, but you know Sandra Thompson, like you're probably getting ready to say, you know Sandra Thompson came out and said okay, I was planning to sit down on the 19th right. Is it normal for someone to kind of just hold out? Or is it normal for someone to kind of just say, right before the election or the inauguration, excuse me, the the step down?
Speaker 3:Yeah, or the inauguration. Excuse me to step down? Yeah. Well, I would say. Most other financial regulators have indicated they're going to step down. Gary Gensler has indicated he's going to step down. Senator Thompson did.
Speaker 3:Often, the president will give the directors of agencies an opportunity within a two-hour window to either step down or be fired.
Speaker 3:So I think if Director Chopra chooses not to step down, he will likely be given that choice by President Trump next week and we will see what happens. But it, by all accounts, has been a little bit of an odd few weeks at the CFPB in terms of the fact that they, you know, chose to ignore letters from Congress asking to put a pause on rulemaking efforts and policymaking efforts after the election and not only just focus on getting a few items out the door that may have had a lot of work done on them or may have been close to final, but really emptied the entire shelves of anything the CFPB was thinking about or even things that were not on the rulemaking agenda. We've seen a whole number of enforcement actions coming out pretty much every day since the election, so it's been a very busy time there. The director of the CPB has chosen to take maybe a different path than many in his response to the election, but I think come next week there will be some efforts to address some of that to address some of that.
Speaker 2:So okay, so now that's interesting. Yeah, that any. Is this like, almost like his, his, his alamo, last stand type thing, like he just fighting to the you know the last minute as much as he possibly can, or is this you know we've? I guess I'll take a step back. You know Zach mentions this and you've mentioned this in the past. This is not uncommon almost setting the stage for future administrations to the point where there's going to know, at some point in time there will be another democrat in in office. You know where he's just trying to push us as much as he possibly can through with the hopes that the next democrat might pick up his this torch or the next democrat cfv director might pick up that torch. Is that the idea behind this?
Speaker 3:I think so. I think he's taking a calculated risk. That unwinding regulatory actions is there. You know it's not, it's not super easy to do. There's, there's, a number of options for doing it.
Speaker 3:There's a lot of activity in the courts right now challenging some of what has been done over the past few weeks. There's efforts underway with Congress to have Congressional Review Act challenges to some of the work, and then there's also the agency, under their administrative process, has options for rolling things back. But all of that takes time, all of it takes effort, all of it takes time. All, then, you know, arguably cannot move forward in a substantially similar way with a rulemaking in that area. We saw that with the arbitration rules, although we saw this week a proposal that looked very much like the arbitration rule that was struck down under the congressional review act. So, um, also not necessarily heeding any warnings from that previous um challenge from congress this week, but um, there's also the litigation that, if you know, some of these rulemakings, like the, for instance, both the overdraft final rule and the medical debt credit reporting final rule, are in litigation. Depending on how that turns out, it could make it very difficult for the agency to go down that path again.
Speaker 3:So you know I personally and I'll give the caveat that my firm is directly involved in the medical debt credit reporting litigation so probably have a biased view of this.
Speaker 3:But I think some of the decisions there could show show some of the sloppiness of pushing things out too quickly without doing the data analysis that should go into such a major rulemaking and that could come back to bite. I think some of the efforts from the medical debt credit reporting issue in the final rule had a discrepancy of within the rule the CPB said that there would be like a nine hundred million dollar impact on the health care industry but then, within the same rule, also said there would be a 2% impact on bad debt in the healthcare industry which just looking at hospital debt alone is more like $900 billion. So they made a few billion dollar rounding error in the analysis that was done. Rounding error in the analysis that was done and I think you know part of that arguably is probably from you know, rushing and putting things out as quickly as possible. So I think there's some calculated political risk, maybe some, maybe there there might be some benefits to that, but there might also be some major challenges associated with that as well.
Speaker 2:Okay, so you know, kind of going back to the medical debt on a credit, and that most certainly was something on my list of things to talk to you about and and they kind of summarize that you know that is, you know, recent. You know a recent rule put out by the CPB essentially said that medical debt is no longer required to be put or listed on credit. In a nutshell, right, and various trades have concerns based off that and the impact for groups to be able to collect on that debt because it's not set on credit, as well as how it may impact the borrowers' true ability to qualify for various types of loan products. Am I understanding that correctly?
Speaker 3:Yes, yes, you know, from the lender's side they essentially cannot receive information about whether there's medical debt on consumers credit reports anymore. But if a consumer voluntarily provides medical information, they then have to use it and they have to align with the CPV's ability to repay requirements that have been laid out in other rules, such as RIGS-E, which is really it's complicated and it's, I think, very problematic. And Cornerstone Credit Union League is one of the plaintiffs in some of the litigation on this and really outlined some of their concerns with why this could be problematic for credit unions. At a very basic level, that just seems like that's a number of compliance concerns and you know legal litigation risks associated with rules like that that have, um, you know, not necessarily intuitive um ways to comply with.
Speaker 2:Okay, all right, okay, thank you. Um, so kind of going back, uh, taking a few steps back and going back to the agency transition conversation. You know, when we look at FHFA, cpb and obviously we know that Sandra Thompson stepping down Sunday the 19th and Chopra is going to hold out to his the very last stand and any hints as to who possibly could be taking those, those seats?
Speaker 3:yes, so the fhfa director that was announced it's going to be bill pulte, who is someone whose family has been in the home building industry for many decades. We believe that he's going to be bringing on some current staff at FHFA, so people that have worked at the agency before on the Republican side and people that are probably very familiar with the work that Mark Calabria did when he was the FHFA director under the prior Trump administration. That is all very new. We're going to see next week, once Director Thompson steps down, how that all comes together in terms of staffing and priorities that are being rolled out, but I think we can assume that there will be some major shifts in the thinking on certain things. There's been a lot of discussion about GSE reform and that topic, so we can pretty I think we can be pretty sure that that's going to be something that they're thinking about, and talking about early on is they're staffing up and figuring out what their priorities look like. They're going to have to work closely with Treasury on that, so there's still probably a number of steps that have to be taken before that whole process becomes totally clear.
Speaker 3:It's also very likely that we've been seeing a deluge of regulations coming out of FHFA, many not necessarily directly relevant to the original mission of the agency.
Speaker 3:You know, things like regulations about tenant protections that many people might argue really belong in somewhere like HUD that is more focused on should arguably be more focused on some of those housing issues and consumer housing issues. So I think we will see potentially some efforts to narrow the scope of what the agency has been working on compared to over the last two years where they've really opened a can of worms on a whole host of things. They've done the 100-year review of the home loan bank system. That I still think will be relevant and something to be discussed but is probably not going to be anywhere near as broad as the many RFIs that came out on that. So we will have a better indication by the next time we talk. But you know initially those are a few of the areas that they're going to have to take a look at the work that was done over the past two years and decide how they want to move forward.
Speaker 2:Okay, what about CFPB?
Speaker 3:how they want to move forward. Okay, what about cfb? Next director? Cfb um we are hearing there's actually not an nominee, has not been announced as of this date. They we expect that they are likely going to have an acting director. Take um director.
Speaker 3:We expect that Donald Trump next week is going to issue a regulatory freeze and you know, arguably some might say that only applies to the executive agencies, but typically the independent agencies also follow that as well. There may even be some language in the executive orders telling the independent agencies to comply as well. So I think the acting director will be tasked with putting in place that freeze and reviewing everything that is in motion, everything that's being sent to the federal register, everything that's being sent to OMB and determining where those things stand. So that can be expected. We're also expecting anywhere between 100 and 300 executive orders next week. So there's going to be a lot to take a look at there and track.
Speaker 3:So it's going to probably it's really going to take a few weeks to shake out. I know a lot of my clients are very eager to meet with the new staff at the CPP right away and talk about things like this medical debt rule and the overdraft rule and you know this Fair Credit Reporting Act proposed rule and explain some of the concerns and the timelines there. I do think it will take a few weeks to shake out, to determine exactly who's making some of those decisions and who's going to be taking a look with maybe a fresh set of eyes on some of those issues. But that will be happening and it will be an important time for the credit union industry to just keep following along about what's happening. Following along about what's happening. There may be some regulations that are not going to go in place or or, you know, being pulled back, and it's just. It will be a busy time to just make sure everyone's understanding what their expectations are and what might be, you know, changes going forward into the spring.
Speaker 2:Okay, you know, I think, you know. I think you know, as you mentioned, you know it's important for the credit union industry to pay close attention on you know, during this transition period. You know one of the things that we really haven't talked about much. I mean, we've talked about a little bit but any, any possible changes that ncaa.
Speaker 3:Well, yes, so we. It's NCUA is a little bit different than other agencies in that it's going to probably remain two Democrats and one Republican for several months still. It's not that immediate flip that you get at some of the other agencies, flip that you get at some of the other agencies. Chairman Huffman will be taking over and you know he, as the Republican, will now be leading the NCUA. So that will be different than you know what's going on now. But he won't necessarily immediately have the votes to make sweeping changes on the, you know, to align with exactly what he's thinking. You know NCUA in general tends to be a little bit less political than the average agency. I think you could argue they are a little bit more successfully independent than some of the other independent agencies. I know there's many caveats to that, but, um, they are, I would say, out of those three, probably the least impacted by the election, although certainly very much impacted okay, okay, and you, you hinted at it.
Speaker 2:So you know, just for the sake of time, let's, let's move on the fcra ruling. What's happening with that?
Speaker 3:Yes, so there was a sweeping proposal that came out a few weeks ago related to how you use data and you know a whole host of other issues under the Fair Credit Reporting Act that would certainly impact ACUMA members. Essentially, a whole another group of use of the credit data system would be considered CRAs and there would be new compliance burdens that would be triggered once they are considered CRAs.
Speaker 2:And when you say CRAs, you're referring to credit reporting agencies.
Speaker 3:Credit reporting agencies yeah, sorry about that, too many acronyms in this podcast but just the use of public data under this proposal would be vastly different if it went into effect.
Speaker 3:And it's sweeping, sweeping and it's something that many industries during this sub-briefer process provided comments on and presented some really serious concerns about.
Speaker 3:The CFPB decided to put it out before the inauguration, even though it's unlikely that the comment period is due in March.
Speaker 3:So it's probably unlikely to be finalized. But it's something that I think industry should take a look at because you know one to your first point on the podcast some of these ideas may come back again four years from now or eight years from now at the federal level and they'll certainly come back even sooner than that at the state level. The CFPB just yesterday released this whole packet of information that they basically sent to the states telling them to go forth with the mission of the Biden administration CFPB, and we certainly think that a number of blue states are going to be doing that. So it's even some of these proposals and final rules that may, at the federal level, get put on pause. They may very well pop up at the state level or, you know, become finalized at the state level very quickly. So I would encourage people that not to put these things aside and not think about them, because some of them could have a massive impact on the credit credit union industry and maybe back sooner or later.
Speaker 2:Okay, and just for the sake of clarity, the FCRA rule you're really referring to the data broker rule, right Data? Broker yes, Okay, okay, you know it's interesting, right. So, if I understood it correctly, it's the collection of certain data points within the credit report and whether or not we end up, or certain data points and whether or not we end up becoming, as a credit union, credit reporting agencies. Is that right?
Speaker 3:It could be in certain circumstances.
Speaker 2:That's interesting, that's absolutely crazy.
Speaker 3:It's insane.
Speaker 2:That's OK, it's insane. That's okay, that's fascinating. I I can see why there's so much pushback from that. Okay, um, before we we kind of transition to the end any final thoughts, anything else?
Speaker 3:um, I don't think so. I mean, I think we we're going to have a lot to talk about at the next few ACUME meetings. There's going to be a lot of transition, I think, going into next week. I know some people are disappointed about the election results and you know we all have our chance every two years and I think we we should, just as a movement, um, we do a great job of being bipartisan and thinking about the opportunities for credit unions and no matter what the election outcome is and I think, um, no matter what your feelings on the election itself are, um, there are some really good opportunities for the credit union system to roll back some regulations that are probably making it harder for you to lend and harder for you to have members, and there are some good opportunities to get some fresh set of eyes on things that may have been problematic.
Speaker 3:There's also, maybe, some challenges in Congress there's I know Zach previously talked about the concerns about the tax exemption and how that could be at risk. We actually saw today the Ways and Means Committee put out a very, I would say, rough list of ideas of potential pay-fors for the tax bill, and the credit union tax status was on that list. That I'm not saying this is by any means a final list. That is definitely going to be in the bill, but it is at this. You know, seeing that list today, I know we all thought it might be on the potential menu or on the table. All thought it might be on the potential menu or on the table. It is officially on the menu and on the table, so there could be some challenges associated with that on the Hill as well. So a lot to do and a lot to follow and just looking forward to continuing to talk with you guys about it and hope everyone stays warm over this very cold weekend and if you choose not to watch inauguration?
Speaker 3:um, find some good tv under a blanket with some hot chocolate and watch something else. And if you want to watch inauguration, um, hope everyone enjoys I know, seriously, I mean hey, there's always football, exactly yeah, always football there's always football, exactly.
Speaker 2:Always football, there's always football. The Ohio State. I did that for Justin, all right. Well, leah, as always, thank you very much for your time. Truly do appreciate it. I guess we'll just close out. Well, leah, as always, thank you very much, and to all of you, we know your time is valuable. Thank you for tuning in to the latest episode of Acuma's On Point Podcast. We hope you enjoyed it.
Speaker 1:Until next time be well, my friends. Thanks for listening. We'll see you next time at the Acuma On Point Podcast. If not already, be sure to subscribe and give us a five-star rating. For more great episodes and information. Be sure to visit us online at acumaorg and to get the latest updates, head over to our LinkedIn page.
