Has “Know Before You Owe” Benefited Credit Unions?

The TILA-RESPA Integrated Disclosure Rule (TRID), commonly referred to as “Know Before You Owe,” has been in effect for a year now. Created by the Consumer Financial Protection Bureau (CFPB) to bring more transparency to the borrowing and buying process, TRID may have evened the playing fields for credit unions taking on large lenders.

Here’s why some believe that:

Both the government and credit unions agree they did not cause the massive lending crisis that resulted in a huge number of foreclosures over the past decade. So the government worked with the credit unions to help them gain a little more equal footing in the lending process. Both sides disagree just how much help these new regulations have been.

Director of the CFPB, Richard Cordray, stated at the National Association of Federal Credit Unions (NAFCU), “we have regularly taken a close look at how credit unions operate and we have worked to accommodate the specific needs of smaller financial institutions. And we will continue to do so.” Cordray has also been quoted saying that membership in credit unions is at an all-time high.

Credit Unions Fall on Tough Times

However, the credit unions disagree. While the intention may have been there, they feel like the reality has fallen short. Over the past five years. 1,280 credit unions have closed. It’s hard to look past those numbers.

NAFCU President and CEO, Dan Berger wrote in a letter addressed to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), “The assertion that credit unions are not being negatively affected by the tidal wave of over regulation arising from CFPB and Dodd-Frank could not be more wrong…Director Cordray’s denial that the tide of regulation is not contributing to the continued trend of credit unions being forced to cut back on member services, merge or go out of business flies in the face of facts.”

But will TRID stop the credit union closures?

Cordray believes so. He says, “When bad practices are rooted out, good practices are able to thrive, freed from the unfair competition of a race to the bottom.” He says credit unions have benefited in the following ways from TRID and the CFPB:

• They revisited mortgage rules to broaden the definitions of “small creditor” and “rural area.”
• They expanded the definition of “rural.”
• The CFPB listened to NAFCU when it said TRID required major operational changes and extensive coordination with third parties. CFPB allowed almost two years for implementation because of that and has made it clear that early evaluations for compliance with TRID will be corrective, not punitive.

But are these things really helping the issues facing credit unions or just placating them? If membership is up, why are so many closing? Do they need regulatory relief and clear guidance on the Dodd-Frank Act?

In a survey compiled by research firm Callahan & Associates of more than 200 credit union execs, they found nearly all (96.1%) of credit unions experienced closing delays thanks to TRID. More than half of respondents cited that it added five or more days to closing. This is a significant concern for the industry and those fond of credit unions.