Legislative & Regulatory Update

​Your voice matters as NCUA reviews regulations; CFPB rules Buy Now, Pay Later lenders are credit card providers; and ND GAC golf outing on June 20! 

by John Alexander, Director of Legislative & Regulatory Affairs

Regulatory Review Underway: Your Voice Matters
The National Credit Union Administration (NCUA) Board is undertaking a comprehensive review of its regulations, aiming to identify and amend rules that are outdated, unnecessary, or overly burdensome on federally insured credit unions. This voluntary review, inspired by the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), is an essential step towards regulatory reform that enhances operational efficiency without compromising safety and soundness.

Over the next two years, the NCUA will publish four Federal Register documents, each seeking public comments on different regulatory categories. The first document focuses on "Applications and Reporting" and "Powers and Activities." Stakeholders are encouraged to submit their comments by August 21, 2024. Your input can help shape the future regulatory landscape for credit unions, ensuring it remains supportive and adaptable to the evolving financial environment.

New Rule Classifies BNPL Lenders as Credit Card Providers: Implications for Credit Unions
In a significant regulatory shift, the Consumer Financial Protection Bureau (CFPB) has issued an interpretive rule confirming that Buy Now, Pay Later (BNPL) lenders are now classified as credit card providers. This classification mandates that BNPL lenders must extend key consumer protections traditionally associated with credit cards, including the right to dispute charges and demand refunds for returned products. This new ruling has broad implications for the financial landscape, including credit unions.

The CFPB's rule, a result of a thorough investigation into the burgeoning BNPL market, aims to bring consistency and transparency to this sector. Rohit Chopra, CFPB Director, emphasized the importance of consumer protections regardless of the payment method chosen, highlighting that whether a consumer uses a credit card or BNPL, they deserve the same level of security and fairness.

For credit unions, this ruling means a new regulatory framework that could influence how they interact with BNPL providers and support their members. Credit unions now have a clear mandate to ensure that members using BNPL services receive protections equivalent to those using traditional credit cards. This includes the right to dispute transactions and receive refunds seamlessly.

The BNPL market has exploded in popularity, offering consumers a way to purchase goods and services, from electronics to travel, in manageable installments without interest. This has attracted a diverse range of users, cutting across various demographics. However, this growth has also led to increased consumer complaints regarding refunds and disputed transactions, prompting the CFPB to take action.

The new rule requires BNPL lenders to:

• Investigate disputes: Lenders must investigate consumer disputes, pause payment obligations during the investigation, and potentially issue credits.
• Refund returned products or canceled services: Lenders must credit refunds to consumers' accounts promptly.
• Provide billing statements: Consumers must receive regular billing statements akin to those for traditional credit card accounts.
• For credit unions, this ruling underscores the need to stay vigilant and informed about BNPL transactions and the associated consumer protections. Ensuring members are aware of their rights and assisting them in navigating disputes and refunds will be crucial.

The CFPB's findings highlighted that more than 13% of BNPL transactions involved returns or disputes in 2021, amounting to $1.8 billion. These figures stress the importance of robust consumer protection measures in the BNPL market, aligning with the protections provided by credit unions for other financial products.

For more detailed information, credit unions and their members can review the full interpretive rule, "Truth in Lending (Regulation Z); Use of Digital User Accounts to Access Buy Now, Pay Later Loans." This document outlines the specific obligations of BNPL lenders, and the protections now afforded to consumers, ensuring that credit unions remain a vital resource in navigating these changes.

Attention ND GAC Supporters!
The North Dakota Governmental Affairs Committee (GAC) is holding a golf outing to raise funds for our state advocacy efforts. Here’s a fun way to support our credit union Political Action Committee (PAC) that continually advocates for a favorable operating environment for our industry!

The PAC Golf Scramble will take place on Thursday, June 20, at Memorial Park Country Club just outside of LaMoure, ND. Memorial Park Golf Course features 3,135 yards of golf from the longest tees for a par of 36 inside of the beautiful James River Valley. This is truly one of the nicest 9-hole courses in North Dakota, and golfers travel from all across the state to enjoy it!

Registration for the ND Golf Scramble opens at 9:30 a.m. (CT) with a shotgun start at 10:00 a.m. Be sure to bring some cash for the on-course games and beverages! Awards will follow the event at approximately 3:30 p.m.
Find additional information and register here. Feel free to contact me with any questions.