Compliance Update with Amy K
CFPB Report - Challenges in Rural Banking Access
The Consumer Financial Protection Bureau (CFPB) recently issued a report concerning challenges in rural banking access, which can be found here.
The report mentions credit unions a couple times, however, the majority of statistics and data relating to banking is based on FDIC information. Some highlights from this initial report include findings that people living in non-metro counties have lower incomes and higher rates of poverty. The report also finds that rural areas have higher rates of consumers who do not have a credit record maintained by one of the three nationwide consumer reporting agencies than metropolitan and micropolitan areas.
The CFPB also found rural customers visit bank tellers at nearly double the rate of urban and suburban customers. In 2019, nearly nine of ten rural households visited a branch, and about four in ten rural households visited ten or more times each year, far more than their urban and suburban counterparts.
The report discusses the “banking deserts” and noted that according to the Federal Reserve, in the five-year period between 2012 and 2017, 40 percent of rural counties lost bank branches. The Federal Reserve Bank of St. Louis defines bank deserts as census tracts in which there are no branches within a ten-mile radius from the tracts’ centers. As of 2014, the Federal Reserve identified 1,132 existing bank deserts, of which 734 (65 percent) were in rural areas and 1,055 potential banking deserts, of which 851 (81 percent) were in rural areas.
The CFPB obtained feedback from various stakeholders at a rural roundtable on February 3, 2022. The feedback included “the qualitative benefits of physical branch access, smaller banks and the relationship banking they offer that they often do not experience with larger banks. Stakeholders told the CFPB that rural economies have unique rhythms, particularly those tied to agriculture, that require local knowledge and long-standing relationships to fully understand. These customers reported that if they are reduced to a number and fed into a large bank’s more general underwriting approach, their credit needs may not be met. Rural stakeholders, particularly small businesses, reported that they need a relationship with someone from their community with “skin in the game” who cares about keeping storefronts open on the local Main Street.”
The CFPB’s report concludes noting further research is required to better understand the needs of rural households and how the CFPB can best ensure that rural residents have equitable access to financial markets. The CFPB has launched a new rural initiative to focus the CFPB’s authorities and resources on addressing the particular needs of rural communities.
NCUA – Apply for CDRLF Grants Starting May 2
The National Credit Union Administration (NCUA) recently announced that eligible low-income designated credit unions seeking Community Development Revolving Loan Fund (CDRLF) grants in 2022 can apply between May 2 and June 24.
The agency will award more than $1.5 million in CDRLF grants to the most qualified applicants, subject to the availability of funds, in four categories:
The NCUA had also recently issued their 2021 Community Development Revolving Loan Fund Congressional Report, which can be found here. In 2021, the NCUA received 298 grant and loan applications totaling more than $5.3 million. In turn, NCUA awarded more than $1.6 million in technical assistance grants to 109 eligible credit unions in 35 states and the District of Columbia in 2021 – this included only one grant in the Dakotas, the report did not detail how many applications from the Dakotas were received. Individual grants ranged from $1,500 to $50,000.
The Congressional report provided examples of the CDRLF funding’s impact in 2021:
CFPB Director’s Remarks to CU Advisory Council
At the beginning of April, the Consumer Financial Protection Bureau (CFPB) Director Chopra provided opening remarks to the Credit Union Advisory Council, which can be found here. A number the Director’s recent remarks on other topics have been at odds with the industry, recall the press releases and blog posts concerning “junk fees.” However, the remarks made to the CU Advisory Council actually echo some of the concerns we have heard from credit unions on the topic of core service providers.
Director Chopra’s concern – “I want to talk a bit about core services providers, the vendors that many small banks and credit unions rely on. In a market where small financial institutions need to compete head-to-head with big players, I am concerned that the core services providers that small players rely on have too much power in the system.” The Director went on to remarked – “many small financial institutions are worried about the rising costs of and limited flexibilities offered by core services providers. While we are seeing many upstart players seeking to enter the core services market, Fiserv, Jack Henry & Associates, FIS, and Finastra remain the largest providers. These four provide numerous functions to financial institutions to fulfill the technical delivery of core bank functions, including deposit taking, payment facilitation, loan origination, account opening and servicing, fraud management, and compliance.”
“Community banks and credit unions know the rhythms of the daily lives of their clients and communities – making them integral to the financial marketplace. Small financial institutions play a pivotal role in many markets, but especially small business lending.” The Director’s comments seem to reflect some understanding of the importance of credit unions – hopefully this will be reflected in down the road when there are proposed rules on the table.
The highly requested Compliance Update videos (formerly called Compliance Connection videos) are BACK! Start off on the right foot with the 2022 Q1 Compliance Update, available in InfoSight by clicking the “Compliance Videos” link in the upper right corner of the screen. The Q1 update provides information on:
As always, DakCU members may contact Amy Kleinschmit with any compliance related concerns.
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