CUNA Comment Letter

CUNA Letter to Federal Financial Regulators Concerning NCUA Privacy Amendment

May 8, 2000

The Honorable Norman E. D’Amours
Chairman
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Dear Chairman D’Amours:

On behalf of CUNA’s member credit unions, I am writing to express our strong opposition to the action taken by the NCUA Board today regarding the privacy rule. Specifically, I am referring to the amendment that was drafted and approved during the Board meeting that will require privacy notices to be given to co-borrowers and guarantors on a loan. This requirement was not in the rule that was presented to the Board. It is our understanding the provision is not contained in the privacy rule to be presented to the other financial institution regulators later this week.

During the legislative process, CUNA was actively involved to ensure that credit unions would not find themselves at a competitive disadvantage to the new financial conglomerates that will be formed in the future as a result of the Gramm- Leach-Bliley Act (Act). Congress listened. The amendment approved by the Board today threatens to undo Congress’ efforts by creating such a disadvantage for credit unions.

Section 504 of the Act requires all financial institution regulators to issue privacy rules and requires the regulators to “consult and coordinate with the other such agencies and authorities for the purposes of assuring, to the extent possible, that the regulations prescribed by each such agency and authority are consistent and comparable with the regulations prescribed by the other such agencies . . .-- Although we recognize that NCUA was given limited deference to make changes in areas that are specific to credit unions, the requirement to provide notices to co-borrowers and guarantors is certainly not an issue specific to credit unions.

We believe that the action taken by the Board today violates Section 504 of the Act because the action was taken without consultation with the other agencies. Also, the NCUA final rule will not be “consistent and comparable-- with the other agencies, unless these agencies are somehow persuaded to follow NCUA’s lead on this issue.

If the other agencies do not adopt NCUA’s approach, then credit unions will be the only financial institutions that will be required to provide notices to co-borrowers and guarantors. There is simply no legitimate reason for credit unions to be singled out in this area. The irony here is that credit unions are actually much less likely to share such information with other parties as compared to other financial institutions that may see value in marketing this information.

As I mentioned in CUNA’s letter, dated March 31, 2000, to you the requirement to provide notices to co-borrowers and guarantors will be extremely burdensome. Credit unions either do not have this information or if they do, it is not in a form that is easily retrievable. The cost to collect and retrieve this information will be exorbitant. It also seems counterintuitive to require credit unions to collect additional information when one of the goals of the proposed rule is to safeguard the privacy of that information. Not having the information in the first place is the best way for credit unions to ensure that it will not be disclosed inappropriately.

We urge the NCUA Board to immediately rescind the amendment approved today to ensure that NCUA’s privacy rule will be consistent with the other agencies. If you would like to discuss this issue further, please contact General Counsel Eric Richard at (202) 218-7796, Associate General Counsel Mary Dunn at (202) 218-7769, or Assistant General Counsel Jeffrey Bloch at (202) 218-7795.

Sincerely,

Daniel A. Mica
President and CEO

cc:
Federal Reserve Board
Federal Trade Commission
Securities and Exchange Commission


May 8, 2000

The Honorable Yolanda Townsend Wheat
Board Member
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Dear Board Member Wheat:

On behalf of CUNA’s member credit unions, I am writing to express our strong opposition to the action taken by the NCUA Board today regarding the privacy rule. Specifically, I am referring to the amendment that was drafted and approved during the Board meeting that will require privacy notices to be given to co-borrowers and guarantors on a loan. This requirement was not in the rule that was presented to the Board. It is our understanding the provision is not contained in the privacy rule to be presented to the other financial institution regulators later this week.

During the legislative process, CUNA was actively involved to ensure that credit unions would not find themselves at a competitive disadvantage to the new financial conglomerates that will be formed in the future as a result of the Gramm- Leach-Bliley Act (Act). Congress listened. The amendment approved by the Board today threatens to undo Congress’ efforts by creating such a disadvantage for credit unions.

Section 504 of the Act requires all financial institution regulators to issue privacy rules and requires the regulators to “consult and coordinate with the other such agencies and authorities for the purposes of assuring, to the extent possible, that the regulations prescribed by each such agency and authority are consistent and comparable with the regulations prescribed by the other such agencies . . .-- Although we recognize that NCUA was given limited deference to make changes in areas that are specific to credit unions, the requirement to provide notices to co-borrowers and guarantors is certainly not an issue specific to credit unions.

We believe that the action taken by the Board today violates Section 504 of the Act because the action was taken without consultation with the other agencies. Also, the NCUA final rule will not be “consistent and comparable-- with the other agencies, unless these agencies are somehow persuaded to follow NCUA’s lead on this issue.

If the other agencies do not adopt NCUA’s approach, then credit unions will be the only financial institutions that will be required to provide notices to co-borrowers and guarantors. There is simply no legitimate reason for credit unions to be singled out in this area. The irony here is that credit unions are actually much less likely to share such information with other parties as compared to other financial institutions that may see value in marketing this information.

As I mentioned in CUNA’s letter, dated March 31, 2000, to you the requirement to provide notices to co-borrowers and guarantors will be extremely burdensome. Credit unions either do not have this information or if they do, it is not in a form that is easily retrievable. The cost to collect and retrieve this information will be exorbitant. It also seems counterintuitive to require credit unions to collect additional information when one of the goals of the proposed rule is to safeguard the privacy of that information. Not having the information in the first place is the best way for credit unions to ensure that it will not be disclosed inappropriately.

We urge the NCUA Board to immediately rescind the amendment approved today to ensure that NCUA’s privacy rule will be consistent with the other agencies. If you would like to discuss this issue further, please contact General Counsel Eric Richard at (202) 218-7796, Associate General Counsel Mary Dunn at (202) 218-7769, or Assistant General Counsel Jeffrey Bloch at (202) 218-7795.

Sincerely,

Daniel A. Mica
President and CEO

cc:
Federal Reserve Board
Federal Trade Commission
Securities and Exchange Commission


May 8, 2000

The Honorable Dennis Dollar
Board Member
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Dear Board Member Dollar:

On behalf of CUNA’s member credit unions, I am writing to express our strong opposition to the action taken by the NCUA Board today regarding the privacy rule. Specifically, I am referring to the amendment that was drafted and approved during the Board meeting that will require privacy notices to be given to co-borrowers and guarantors on a loan. This requirement was not in the rule that was presented to the Board. It is our understanding the provision is not contained in the privacy rule to be presented to the other financial institution regulators later this week.

During the legislative process, CUNA was actively involved to ensure that credit unions would not find themselves at a competitive disadvantage to the new financial conglomerates that will be formed in the future as a result of the Gramm- Leach-Bliley Act (Act). Congress listened. The amendment approved by the Board today threatens to undo Congress’ efforts by creating such a disadvantage for credit unions.

Section 504 of the Act requires all financial institution regulators to issue privacy rules and requires the regulators to “consult and coordinate with the other such agencies and authorities for the purposes of assuring, to the extent possible, that the regulations prescribed by each such agency and authority are consistent and comparable with the regulations prescribed by the other such agencies . . .-- Although we recognize that NCUA was given limited deference to make changes in areas that are specific to credit unions, the requirement to provide notices to co-borrowers and guarantors is certainly not an issue specific to credit unions.

We believe that the action taken by the Board today violates Section 504 of the Act because the action was taken without consultation with the other agencies. Also, the NCUA final rule will not be “consistent and comparable-- with the other agencies, unless these agencies are somehow persuaded to follow NCUA’s lead on this issue.

If the other agencies do not adopt NCUA’s approach, then credit unions will be the only financial institutions that will be required to provide notices to co-borrowers and guarantors. There is simply no legitimate reason for credit unions to be singled out in this area. The irony here is that credit unions are actually much less likely to share such information with other parties as compared to other financial institutions that may see value in marketing this information.

As I mentioned in CUNA’s letter, dated March 31, 2000, to you the requirement to provide notices to co-borrowers and guarantors will be extremely burdensome. Credit unions either do not have this information or if they do, it is not in a form that is easily retrievable. The cost to collect and retrieve this information will be exorbitant. It also seems counterintuitive to require credit unions to collect additional information when one of the goals of the proposed rule is to safeguard the privacy of that information. Not having the information in the first place is the best way for credit unions to ensure that it will not be disclosed inappropriately.

We urge the NCUA Board to immediately rescind the amendment approved today to ensure that NCUA’s privacy rule will be consistent with the other agencies. If you would like to discuss this issue further, please contact General Counsel Eric Richard at (202) 218-7796, Associate General Counsel Mary Dunn at (202) 218-7769, or Assistant General Counsel Jeffrey Bloch at (202) 218-7795.

Sincerely,

Daniel A. Mica
President and CEO

cc:
Federal Reserve Board
Federal Trade Commission
Securities and Exchange Commission