Financial regulation is undergoing a seismic shift, creating unprecedented challenges for credit unions and mortgage lenders. Our expert guest, Leah Dempsey, a Shareholder with Brownstein Hyatt Farber Schreck, walks us through the complex policy landscape reshaping credit unions' operations.
The CFPB stands at a pivotal moment following a DC Court of Appeals decision that could enable significant staff reductions. While the Bureau has already fulfilled many statutorily mandated duties, this ruling raises questions about its capacity to undertake planned initiatives like payday loan rule revisions and review market participant thresholds. The legal battle continues with potential appeals, creating regulatory uncertainty for financial institutions navigating compliance requirements.
Meanwhile, "debanking" receives renewed attention through a recent executive order addressing discrimination against legally operating businesses in banking relationships. Dating back to Obama-era policies that identified disfavored industries, inconsistent application of these guidelines resulted in legitimate businesses losing access to financial services. Credit unions should review their membership policies to ensure they don't categorically exclude industries or individuals without proper cause.
Perhaps most dramatic is the unprecedented leadership vacuum at the NCUA, where legal maneuvers have left Chairman Kyle Hauptman as the sole board member – a situation never before seen in the agency's history. This extraordinary circumstance raises profound questions about decision-making authority and regulatory guidance, particularly for emerging areas like cryptocurrency. Credit unions face significant operational challenges amid this leadership uncertainty.
The potential IPO for Fannie Mae and Freddie Mac adds another layer of complexity, with discussions accelerating about releasing the GSEs from conservatorship. Questions persist about government guarantees, implementation timelines, and the impact of complex financial arrangements from the conservatorship period. These decisions will fundamentally reshape mortgage markets and lending operations.
Subscribe now to stay informed as these critical policy developments unfold, and join us next time for more expert analysis on the issues that matter most to credit unions and their members.
Episode Transcript
The views and opinions expressed in this
podcast do not necessarilyreflect the views or positions
of Acuma, its board of directors, its management staff or its
members.
The podcast discussionpresented is conversational in
nature and for generalinformation only.
Speaker 2 (00:32):
Hello and welcome to Actors On Point Podcast, the
policy series where we focus onpolicy issues impacting the
credit union mortgage industry.
I'm your host, peter Benjamin.
Before we get to our episode,just a quick word from our
sponsor.
Speaker 3 (00:42):
This episode is being brought to you by Loan Vision.
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Speaker 2 (01:24):
Joining us today as our resident expert is Leah
Dempsey, shareholder withBrownstein Leah, how are you
doing today?
Speaker 4 (01:32):
I am doing well.
Speaker 2 (01:33):
That's good, leah, it's good to see you in the
office today.
I know, I know it's been kindof sort of crazy in DC as of
late.
I mean not just on Capitol Hilland everything that's coming
out from a policy standpoint,but literally crazy in DC with
all the things that arehappening on the streets.
But we're not here to talkabout that, so let's focus on
(01:55):
the policy issues that areimpacting our members.
First up, I think we want totalk about the CFPB.
What is happening over at theCFPB?
Speaker 4 (02:04):
Sure, and I will just say on the issues we're not
talking about, I live in CapitolHill and my children are
outside with their chalkpainting rainbows on the front
porch.
I didn't see any.
I didn't see any armed guards.
So we can talk about that moreanother time.
But I think you know at theCFPB a lot is going on there.
(02:26):
Last week we got a decision outof the DC Court of Appeals
related to the attempted firingsof CFPB staff.
We saw this happen early on inthe administration where the
Trump administration attemptedto eliminate the vast majority
of the CFPB staff.
I think it was going to bearound 1,400 employees.
(02:47):
There was a lawsuit that led toan injunction stopping that
from happening.
Everyone's been waiting forseveral months to see what the
outcome of that would be andlast week, on Friday, of course,
a vacation, august holiday weget some news, as we typically
do in DC to to throw a wrench inour August, that they are
(03:12):
reversing that injunction andthe CFPB, you know arguably at
this point could move forwardwith eliminating staff members
if they wanted to, staff membersif they wanted to.
But a few caveats around that.
We do think they're going toprobably see an appeal to that
decision.
Very likely they're going tohave a request to go unbonk in
(03:35):
the DC Court of Appeals, whichbasically means a larger panel
of judges would take up the sameissues and the DC you know the
court is pretty heavilypopulated with Democrat
appointed judges, so I thinkeveryone is waiting to see if we
(03:56):
see additional activity there.
We also know that Judge Bergmanhas had a strong opinion on
this matter and you know theinjunction was just one part of
the case to be litigated, sowe'll probably see some
additional activity in the trialas well.
They got a very good ruling outof the Court of Appeals, but
(04:19):
probably just another step in alegal battle that's probably
going to continue on.
Speaker 2 (04:34):
So random question.
So obviously we've seen theCFPB make you know dramatic
staff a dramatic staff reduction.
Make you know dramatic, youknow staff, a dramatic staff
reduction.
Are there signs that theycontinue, that they plan to make
(04:57):
even more staff reductions?
You know the CPV as we know ittoday.
Is it the CPV that we will seetomorrow or the next day or next
year, however you want to frameit up?
That does this.
Does this case, this lawsuit,whatever you want to call it,
set the precedence fordismantling the cpb completely?
(05:19):
I mean, where do we go fromhere and how we operate under
the CFPB and the regulations wehave to operate within?
I mean because, obviously, yes,there's the deregulation,
there's all the things that wehave going on, but there's still
(05:41):
staff that has to perform theduties within the CPB, right?
So what does that look like?
Speaker 4 (05:48):
Yeah Well, I would just say first, from a legal
standpoint, the dissent in thedecision, you know, made a big
deal about the fact that the CPBhas to carry out their
statutory duties.
So they need to have enoughstaff to do that, and I was
actually talking to a friend atanother law firm about this this
morning.
The interesting thing aboutthat is the CFPB has already
(06:12):
carried out a lot of theirstatutory duties.
On the rulemaking side theyreally only had a few
statutorily mandated rulemakingsand most of those were the
mortgages that they already tookaction on in their first deck
existence.
1071 is another one that'sstatutorily required and we've
(06:34):
seen some of the litigation andactivity on that.
Some of their supervisionfunctions are statutorily
required but a lot of theirenforcement activity is not
statutorily required.
So, long story short, a lot.
They've already done a lot ofwhat Dodd-Frank tells them to do
(06:54):
.
So there certainly could be anargument that a pretty small
staff could carry out the restof the statutorily required
activities of the CFPB.
You know, that's the legal,that's my legal thought process
of it.
You know, you know, practicallyspeaking, would it be a problem
(07:16):
if, rules or not, people toaddress things like you know bad
actors out there throughenforcement activity.
I think, yes, you're going toprobably want to have enough
(07:37):
staff to address many.
You know some of the many thingsthat industry is is seeking
feedback on right now and andsome of the changes that they've
been asking for throughrulemaking.
They just indicate it in theirrulemaking.
So they put out theirrulemaking agenda on friday and
then it aired from the internetlike an hour or two later, which
(08:00):
is kind of odd.
And this was not just a CFPB,this was the unified agenda for
all agencies.
But before that happened, a lotof people wrote down what it
said and there was one thatindicated they're going to
reopen the payday loan rule.
So we know that's a pretty bigundertaking to readdress that
rule.
(08:21):
They're also going to be takinga look at the larger market
participant thresholds forcredit reporting agencies, the
debt collection industry, moneymarkets, and you know that is
not something that can get doneon its own without staff.
So there's certainly someactivity that they've indicated
(08:44):
they want to do that is going torequire some staff to move
forward.
Speaker 2 (08:51):
All right, interesting All right.
So we also really want to talkabout the recent stuff on
debanking.
Let's focus on that.
Speaker 4 (09:01):
Yeah, so that.
So this has been a big, a bigpart of the Trump administration
.
President Trump has been clearthat he himself was debanked and
shortly after January 6th andyou know, named some of the
banks that he believes he wastargeted by.
Targeted by it's also beyondthat.
(09:25):
It's been a larger issue formany industries, dating back to
the Obama administration, wherethe FDIC and the OCC and some of
the banking regulatorsbasically came up with a list of
businesses that were disfavoredbut not necessarily illegal.
Illegal Payday loans were onthat.
(09:52):
The debt settlement was on it.
A few other regulatedindustries were on there Guns, I
think, like I don't know if Icould say this on the podcast
like the porn industry was onthere.
Speaker 2 (10:01):
Oh, you're fine with that.
Speaker 4 (10:04):
I don't know if that's regulated.
That's another area of law.
We need someone else to lookinto that piece.
But it was something that itkind of took a life of its own
and I will say one example ofthat is debt settlement is very
different than what debtcollection is.
They're two totally differentindustries.
But some examiners interpretedthe debt settlement being on the
(10:29):
list to mean debt collectionwas on the list, and I know many
clients in the debt collectionindustry lost their banking
relationships.
So it was not only that theyhad this list, but different
examiners were interpreting itin different ways and it just
became a problem that a lot ofpeople were talking to Congress
about.
(10:49):
And the OCC under the firstTrump administration was
actually going to do aregulation on.
It called fair access tobanking, and it got pulled when
the Biden administration tookover.
Really, president Trump'sannouncement last week
essentially said people shouldnot be picking winners and
losers in the banking system.
If people are legally operatingbusinesses that are regulated,
(11:15):
they shouldn't be categorizeddifferently by banks, and he
outlined a host of other thingsthat he thought were important.
The OCC comptroller basicallysaid they're going to do another
rulemaking on this issue aswell.
This wasn't ever really aspervasive in the credit union
(11:38):
industry.
It was much more of a bankingindustry issue, but it's still
something that credit unionsshould take a look at because to
the extent that they were, youknow, looking at certain
businesses or not includingmembers for you know certain
(12:00):
reasons that that could now besomething that, with this
executive order, they are you,they are penalized for by the
NCUA or through, like theprivate plaintiff's bar or
something like that.
Speaker 2 (12:14):
So this is always so.
Was this just focus onbusinesses?
Was this ever attached toindividuals personal?
You know that there was a lotof reports of certain
Republicans being debanked.
Speaker 4 (12:58):
But you know really for the the the issue with the
banking regulators and the FDICand the OCC, that was a little
bit different, where it wasreally more targeting certain
industries like the gun industry, and then on top of that there
was some problems with peoplegetting involved in certain
political ways or religiousleanings or things like that.
Speaker 2 (13:20):
Okay, okay.
So I mean that aspect right,you know whether it's, or even
the criminal record aspect,right, if you focus on, you know
, january 6th, you know thatright there.
You know, potentially, you knowthe debanking process for at
(13:48):
least accrediting and why theymay not be, may not allow
someone to become a member orcancel the relationship with
someone.
Right, because of the criminalrecord.
But at the same exact time, Iguess that does play into the
complaint or the reasoning forwhy this banking thing is coming
(14:10):
up, right, am I going down thatpath?
Speaker 4 (14:13):
I mean, I think you're right that there's a
little.
There's a little bit of a grayarea because, for example, the
crypto industry they were alsopart of this group that there
was some discrimination againstwere also part of this group
that there was somediscrimination against.
But then there were people likesam bankman, freed out there
that probably should have beendiscriminated against because he
(14:33):
was like defrauding people andtaking tons of money.
Um, ended up, you know, being areally bad thing.
So to the extent that he wasbeing debanked, that was
probably not a bad thing.
But I think that the messagethat this executive order is
trying to send is that youshouldn't be eliminating the
(14:55):
whole industry.
You shouldn't just say everyonein the crypto industry is a bad
person and they shouldn't get abanking relationship.
And they shouldn't get abanking relationship.
If there is you know, reallyunder like AML review or you
know some of the other requiredreviews a real reason that
(15:16):
someone is a problem or a redflag.
That's still, I think, a safeway to deny banking
relationships, but it shouldn'tbe under any categorical
classifications, just as certainindustries.
Speaker 2 (15:34):
Okay, appreciate that All right.
So next up, I know this isgoing to be near and dear to us
within the credit union industry.
I think it impacts us not juston the mortgage side but the
credit unions as a whole, theNCUA.
I mean, this has been nothing,but you know, I don't want to
say turmoil but crazinesshappening over there.
(15:57):
There's been some movementhappening over with the NCUA and
recent lawsuits.
What's happening with, you know, the NCUA lawsuit.
Speaker 4 (16:10):
Yeah, so this the latest on this one, and this was
kind of strange timing in that,as you, as everyone probably
saw, the Democrat board memberswere reinstated just basically
the day before the NCUA boardmeeting, the board meeting.
(16:37):
They were back for a few daysand then, um, their case got
appealed and they actually, umare now able to be fired again.
So they're they're no longeryou know, in the current state
of the litigation currently nolonger board members.
Uh, the way the way thingsstand right now, um, this, this
is going to be the same as theCFPB case.
It's going to continue on inthe appeals phase and we're
(17:00):
going to probably see, um, youknow, several more rounds of
this before we get a finaldecision.
Uh, there's also obviously, theFTC hanging out there with some
similar questions, because theyhave a multi-member commission
and they fired all the democratsat the ftc as well, um, so this
(17:20):
, this is for for credit unionmembers, I think.
Going back to crypto for asecond, which we were just
talking about, um, you know thatwe've had all these new stable
coin laws pass and the GeniusAct is now a law, but there's
some questions hanging out therewhether Kyle Hopman, as the
(17:42):
chairman, on his own can put outadditional guidance on things
like stable coins, because theDemocrats are not in place, and
it's unprecedented for this tobe the case.
We've never seen this happen inthe history of the NCUA before.
So all of the legal authoritieswithout a fully functioning
(18:02):
board just are unchartedterritories that no one everyone
can have opinions on it, but noone for sure knows how a court
will rule on some of thesethings until it happens.
So credit unions are definitelynavigating all of that right
now, waiting to see, you knowone, the opinion on what happens
with the Democrat board members, but also just some of the
(18:27):
actions the NCUA might be takingwithout um, if there's going to
be any repercussions for thatin the future as well.
Speaker 2 (18:40):
I mean it's how much so?
How much longer does the NCOAstay like this?
I mean with with Hoffman stillbeing the only person over there
.
I mean how much longer?
I mean it's, there's two waysyou can approach that question.
You know, still being the onlyperson over there, I mean how
much longer.
I mean it's, there's two waysyou can approach that question.
(19:02):
You know there's the idea ofhow much longer can it be like
this?
I mean, you know the kind ofphilosophical idea of, okay,
well, hoffman was supposed to beout at the end of this month, I
think right, or at some pointin August.
But then you have the idea ofokay, well, this lawsuit's going
on and what that means isthere's three seats that are
(19:23):
basically up in the air.
I mean, I think, speaking as acredit union person, we need
sound direction, right direction, right, you know credit unions,
you know how much longer can itbe like this?
Or it's part of I think we, wekind of essentially need three
board members right in play, ordo you have any insight?
Speaker 4 (19:48):
it's, it's, it's.
I think the whole thing withall the agencies is very
complicated.
I mean, the ftc is also in thesame boat where they have a
multi-commissioned board where,you know, the funny thing is at
the CFPB.
This is something Republicanshave been pushing for for a long
time.
They've been pushing to have abipartisan multi-member board at
(20:13):
the CFPB, who have a bipartisanmulti-member board at the CFPB
and that's part of their part oflegislation.
That's on the Hill and has beenfor the past 10 years.
And then NCUA kind of alreadyhas that.
Obviously they're, they're setup a little bit differently than
the average board, because itwas, you know, other agencies,
like the Democrats, don't stayon and stay in the majority of
(20:38):
having two to one when aRepublican wins.
So that is, that's a little bitdifferent and maybe something
that Congress would want to takea look at at some point.
But it is it's.
It's a little bit complicatedand arguably maybe hypocritical
for Republicans to be against aboard at the NCUA but then, in
(21:03):
the same vein, be advocating forthat in the past at the CFPB
and someone that works veryclosely with many people on that
side of the aisle.
We're going to definitely seeswings back.
The pendulum always comes backwhen Democrats take over at some
(21:24):
point, and you know they'reprobably going to do the same
thing as the Republicans.
Now that that precedent hasbeen set and fire all the
Republicans on the board and toyour point, if that just
continues to happen over andover for many years, that's
becomes a really real problem,with uncertainty in the
(21:45):
marketplace and the ability tooperate.
Speaker 2 (21:50):
It's a vicious cycle.
It really is, really is Allright.
Last one a vicious cycle.
It really is, really is allright.
Last one, last topic, which Ithink you know as the mortgage
professional in me, it's justwatching it like a soap opera,
this ipo, uh, with the gses.
I mean I don't want to say giveme a break, but but I mean,
(22:13):
come on, man, I mean shed somelight on this IPO thing.
Speaker 4 (22:19):
Yeah well, and I will say I wish I could shed more
light than I probably am aboutto, but it's definitely
something that over the pastthree weeks, the discussions
about the GSEs being spun out ofconservatorship had a little
bit gone quiet, even though weknew things were coming from the
administration.
(22:39):
The president indicated that,and then there was this
announcement two or three weeksago about this IPO.
There's also a lot ofdiscussion about a merger with
Fannie and Freddie.
Merger with Fannie and Freddie.
(23:01):
All of this has a lot offactors that have to be taken
into consideration, a lot ofthings that could impact stock
price, a lot of things thatcould impact the mortgage market
and all you know.
All these individual piecestogether really add up to many,
many decisions that the Trumpadministration would have to be
making if this is really goingto happen by the end of the year
(23:21):
.
I will say also that thesethings also often take a pretty
long time.
Even if they move forward withan IPO plan by the end of the
year, that's not to say it mightnot take another half a year or
year to actually happen.
So it feels like things arehappening quickly, but it really
(23:43):
could arguably be more likethings happening within the next
year or so, but it is somethingthat a lot of you know of
highly skilled professionalsneed to be involved in.
A lot of people think that theTreasury is going to take the
lead on this and that SecretaryBesant and people working in the
(24:09):
Trump administration are goingto be working closely on this
together, but you know, sadlythere's not a ton of details or
information out there yet thatpeople can really wrap their
hands around as we're hearingthese rumors.
Speaker 2 (24:31):
So as part of this IPO, is he still saying you know
, an implicit guarantee, like itwere?
What does, what's he sayingwith this IPO?
Or has he pivoted back toexplicit?
Speaker 4 (24:50):
That was.
That's a good question.
I know that that is the bigquestion on a lot of people's
mind.
I think the latest is more theimplicit guarantee, not explicit
.
Speaker 2 (25:23):
That is a question that they have never they
haven't really given a firmresponse on yet and something
that people are definitelytaking a look at.
I mean more to come right.
I mean this, like you said, Imean this although it feels like
it's moving ahead, it's stillgoing to really take a while for
this really to unfold and Iguess the answers are going to
come from a lot of people whoare a lot smarter than me and
(25:45):
we'll just see.
We'll just see, sit back andwatch, eat some popcorn.
We'll go from there.
Speaker 1 (25:52):
Well Leah.
Speaker 2 (25:53):
Go ahead.
Oh sorry.
Speaker 4 (25:55):
I was just going to add, like things, like you know,
fannie Mae has warrants thatthey had as part of the
conservatorship, and things likethat that are really going to
impact potentially the stockprice and all of that, so that
those are the types of thingsthat not only we're on
(26:16):
considering, like the housingside of this.
Um, there's those like moredetailed questions, even beyond
the question of implicit versusexplicit.
So to your point um, I think weneed to get our popcorn ready
and, um, you know, also, to theextent that stakeholders, I
think at some point are going tobe part of these conversations,
(26:38):
really because they have to beCredit unions, are going to want
to make sure they're, at leastyou know, part of that
conversation, to the extent thatanyone is, because everyone's
going to be impacted in someways by this if it actually
happens, in some ways by this,if it actually happens.
Speaker 2 (26:54):
Hands down.
Well, Leah, thank you so much,Appreciate your time today.
As always.
We appreciate everything thatyou and the rest of the
Brownstein team does for Acunaand our community and we hope to
see you soon.
Speaker 4 (27:14):
Thanks everyone.
Speaker 2 (27:16):
And to quickly close out, thank you again to Loan
Vision for sponsoring today'sepisode and to all of you.
We know your time is valuable.
Thank you for tuning in to thelatest episode of Acuma's On
Point Podcast.
We hope you enjoyed it.
Until next time.
Be well, my friends.
Speaker 1 (27:31):
Thanks for listening.
We'll see you next time at theAcuma On Point podcast.
If not already, be sure tosubscribe and give us a
five-star rating For more greatepisodes and information.
Be sure to visit us online atacumaorg and to get the latest
updates head over to ourLinkedIn page.
Thank you.
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