NCUA Says NJ 'Security' Law Preempted By FCUA

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NCUA said last week federal credit unions need not comply with New Jersey's new Homeownership Security Act because the Federal CU Act preempts the action aimed at curbing predatory lending. "Our opinion is the law is preempted because it purports to limit or affect the rates, terms of repayment and other conditions of loans and lines of credit that FCUs may offer to their members," NCUA said in a new legal opinion letter.

The New Jersey law, passed in 2002 and enacted in 2003, requires certain disclosures and prohibits certain terms and conditions on home loans, covered home loans and high-cost home loans. They prohibit single premium financing of credit insurance, debt cancellation coverage or suspension coverage; ban the encouragement of default to refinance debt; limit late payment fees and charges for payoff balance fees; and bar acceleration of the debt at the creditor's discretion, among other things. NCUA has also issued preemption letters in recent years for new predatory lending laws in Georgia, North Carolina, and the District of Columbia.

The federal credit union regulator also issued separate legal opinions last week expressing similar views preempting state laws governing debt cancellation agreements.

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