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NAFCU urges CFPB to revise escrow rule definitions of “rural,” “underserved”

NAFCU_logo_editedThe National Association of Federal Credit Unions urged the CFPB last week to revise the definitions of “rural” and “underserved” in its escrow rule to allow more credit unions to qualify for exemption from the rule.

The CFPB’s escrow rule, which amends Regulation Z to implement changes to the Truth in Lending Act as mandated by Dodd-Frank, requires creditors to maintain a mandatory escrow account for some high-priced mortgages for a longer amount of time.

The rule exempts credit unions that operate in predominantly rural or underserved areas. Under the current definition of “rural,” a county is considered rural if it is neither a Metropolitan Statistical Area nor a micropolitan statistical area adjacent to an MSA area with a certain number of residents working in the MSA.

“We do not agree that a county designated as a micropolitan statistical area should automatically be disqualified from being deemed ‘rural’ simply because it borders, in any way, a MSA,” NAFCU said in a letter to the CFPB. “For example, a large county that shares a small border with a MSA but otherwise does not share a border with that or any other MSA should be considered ‘rural.’”

NAFCU also recommended the CFPB extend the exemption to include credit unions with a “rural” community charter, not just those institutions that provide services in rural areas.

“Such credit unions have already been deemed to be serving rural areas by the National Credit Union Administration,” NAFCU said. “By deeming such credit unions ‘rural,’ the CFPB would make its escrow rule consistent with an established regulation and consequently limit regulatory burden on such credit unions.”

Additionally, NAFCU said the CFPB should revise the definition of “underserved,” which currently designates areas in which not more than two or more creditors have extended five or more covered transactions in the calendar year, to allow exemptions only for institutions with a physical presence in the area.

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