Credit Union National Association outlines 115th Congress Priorities
Letter from Jim Nussle
WASHINGTON, DC (January 3, 2017) — Members of the United States Senate
Members of the United States House of Representatives
Dear Senators and Representatives:
On behalf of America’s credit unions and their more than 100 million members, congratulations on your election to the 115th Congress. We look forward to working with you over the next two years to ensure that local, member-owned credit unions can continue to serve their members.
Credit unions are not-for-profit financial cooperatives and were first established in the United States more than a century ago because most consumers had little to no access to safe, affordable financial services. The idea was that people could create economic freedom by pooling their savings and lending to each other. The idea perseveres today through a system of nearly 6,000 state and federally-chartered credit unions serving more than 100 million Americans. Since day one, credit unions have been a shining example of consumer protection in the financial services sector. They are pro-consumer protection institutions because they are owned by the consumers who rely on their services. Credit unions live by their motto, “People Helping People,” every single day.
Congress Should Return to Common-Sense Regulation of Credit Unions
Credit unions accept that they must operate in a regulated environment. Common-sense regulation balances safety and soundness, consumer protection, and members’ needs. The behavior of the large Wall Street banks, some nonbank financial services providers, and other abusers of consumers caused the greatest financial crisis since the Great Depression, throwing this balance out of whack. The post-crisis regulatory response, which has resulted in the Consumer Financial Protection Bureau (CFPB) applying one-size-fits-all consumer protection regulation to all providers regardless of size, structure, or history of consumer service, has further disrupted the common-sense balance.
One-size-fits-all does not work for Main Street – local credit unions, small banks, and the consumers and small businesses they serve. It has created a rigged system favoring the largest institutions that can afford to comply with these new, complex regulations. Credit union members themselves feel the adverse impact of this rigged system when basic financial services offered by credit unions become less available and more expensive. Small credit unions in particular report having stopped or greatly reduced mortgage offerings as a result of the CFPB’s new mortgage lending requirements. Nearly half of the credit unions that offered remittance services prior to the CFPB’s remittance regulation have stopped or greatly reduced these services.
The totality of new, one-size-fits-all regulatory requirements have forced credit unions to divert extraordinary resources from member services to compliance functions. Credit union CEOs tell us that if their regulatory burden was reduced, they would reallocate these resources to better member pricing, better service delivery, and strengthening their institutions, all of which would benefit credit union members.
The very regulations aimed at reining in the abuses of Wall Street banks and other abusers of consumers are slowly but surely robbing consumers of Main Street financial services. The law and regulations ought to be doing just the opposite. Local member-owned credit unions know and understand their members better than the mega-banks do. They are, and have always been, the most consumer friendly financial institutions.
To ensure the continued viability of community-based financial institutions, we urge Congress to enact legislation that modernizes the Consumer Financial Protection Bureau (CFPB) and addresses problems that several of its final and pending rulemakings have presented credit unions and their members.
CFPB Structural Reform Would Enhance Consumer Protections
As presently structured, the CFPB is an anomaly in the federal government. The CFPB’s extraordinary authority is vested in a single person absent of appropriate levels of Congressional oversight. Conforming the CFPB to include a multi-member Commission would enhance consumer protection by ensuring that diverse perspectives are included in final rules and prevent disruptions and market uncertainty caused by personnel changes. Ultimately, credit union members benefit from policymaking that includes more voices.
The CFPB’s current funding scheme is also ineffective, as it takes power out of the hands of consumers’ elected representatives, does not incentivize the CFPB to prioritize resources, and fails to ensure appropriate oversight. Funding the CFPB through appropriations means taxpayers through you and other elected representatives have a voice in the priorities of the CFPB. Credit union members will benefit from a Bureau that is going after the bad guys and is subject to direct oversight and funding by representatives they elect to Congress.
Local credit unions and small banks do not present significant risk to consumers and have federal regulators capable of supervising compliance with consumer protection laws. Increasing the threshold for CFPB supervision to $50 billion in asset size and indexing it for inflation will allow the CFPB to focus supervisory resources on large Wall Street banks and nonbank financial services providers which present the greatest risk to consumers.
In addition, basic tenets of the rule of law suggest that regulations should be clear, publicized, stable and just, but the CFPB failed consumers by ignoring these principles. The CFPB has used its Unfair, Deceptive, and Abusive Acts and Practices (UDAAP) authority as a broad tool to sweep credit unions into proposed regulations consistent with its ideological goals, despite no evidence of harm to consumers. It has attempted to circumvent the data collection and research requirement necessary to issue rules by using UDAAP as a “catch-all,” as is the case in the CFPB’s payday lending proposal. In its supervisory role, the CFPB has used this authority to admonish and penalize credit unions for engaging in practices consistent with longstanding statutory directives and guidance from their prudential regulator. Through these actions, CFPB circumvents the will of Congress and harms consumers by creating an uncertain operating environment for credit unions and their members. The CFPB unfortunately has proven that many abuses can stem from such unrestrained authority to make UDAAP findings. Accordingly, Congress should repeal the CFPB’s UDAAP authority.
Congress anticipated that if left to its own devices, the CFPB’s rulemakings might have the unintended consequence of impeding access to safe and affordable financial services provided by local, member owned credit unions and community banks. That is why the CFPB is required to take into consideration the impact its regulations have on those serving rural and underserved areas and why the CFPB has statutory authority to exempt smaller or less complex, local, member-owned financial institutions from its rulemakings as necessary. As discussed below, the CFPB’s failure to use this authority has harmed consumers seeking safe financial services from credit unions, such as remittances and mortgages, by making these services more expensive and less available. Congress should enact legislation to clarify that credit unions are exempt from CFPB rules unless the CFPB demonstrates credit unions are causing consumer harm.
Corrective Action Needed to Mitigate Adverse Impact of CFPB Regulations
We have called on the CFPB to engage in a moratorium on new rulemaking, and we urge Congress to do the same. Through the enactment of common-sense regulatory reform, Congress should also take corrective action to mitigate the adverse impact of recently promulgated CFPB regulations and to stop pending and future rulemakings from harming consumers’ access to safe and affordable financial services from local, member-owned credit unions.
For example, the CFPB’s new rule on the Home Mortgage Disclosure Act requires lenders to report significantly more data points than Congress required under the Dodd-Frank Act and also requires credit unions to report data for home equity lines of credit (HELOCs), which was not mandated by statute. This regulation is an extreme resource drain for credit unions and their members and unnecessarily risks consumers’ personal data. Further, the CFPB intends to implement this regulation unfairly and deceptively by not disclosing to lenders which data points will be publicly reported. We urge Congress to stop the implementation of this new regulation.
The new rules implementing the TILA/RESPA Integrated Disclosure requirements should be revised to make the closing process simpler while maintaining clear disclosures for consumers. The ability to cure defects and correct errors and the corresponding liability should be clarified. Current procedures have unnecessarily delayed closings and increased costs for consumers. We hope Congress will encourage the CFPB to fix this rule immediately.
The CFPB’s regulatory requirements on remittances should be amended so more institutions can return to providing this service for consumers. As noted above, many credit unions have exited the market as a result of overly burdensome regulations.
There is no reasonable case to be made that credit unions ought to be covered by the CFPB’s payday and small dollar loan proposal. Credit unions’ history of providing these loans as a safer alternative in an effort to save members from abusive lenders is simply indisputable. The number of complaints filed against credit unions for this type of lending can be counted on one’s fingers and the CFPB has produced absolutely no research or data focused on credit union small dollar lending to warrant any new regulatory requirements. The CFPB should exempt credit unions entirely from this rulemaking or withdraw the proposal.
Likewise, the CFPB should withdraw or exempt credit unions from its arbitration proposal because a class-action suit against a credit union requires members to sue themselves as member-owners. An affected class of member-owners have dispute resolution options that bank customers do not have because they can vote out the Board of Directors. Most disputes are handled without the need for arbitration, but the CFPB proposal forces parties into court. If the CFPB finalizes this proposal, the only winners will be plaintiffs’ attorneys.
Finally, the CFPB should recognize that Congress has not expressly subjected credit unions to the Fair Debt Collection Practices Act (FDCPA), and therefore credit unions should not be included in any rulemakings concerning debt collection. Congress specifically did not change the FDCPA through the Dodd-Frank Act, and Congress should prevent the CFPB from using its UDAAP authority to circumvent statutory precedent.
Conclusion
We believe the viability of local, member-owned credit unions is essential to economic freedom and growth, and a critical ingredient of consumer financial protection. Congress and regulators can provide greater consumer protection by ensuring that local, member-owned credit unions and community banks are able to thrive in a balanced, common-sense regulatory environment that does not favor too-big-too-fail banks and others that prey on consumers and whose behavior caused the previous financial crisis.
America’s local, member-owned credit unions and their members are eager to work with you to bring about this reform. On behalf of America’s more than 100 million members, thank you for considering our views.
Sincerely,
Jim Nussle
President & CEO
About CUNA
Credit Union National Association (CUNA) is the only national association that advocates on behalf of all of America’s credit unions, which are owned by 135 million consumer members. CUNA, along with its network of affiliated state credit union leagues, delivers unwavering advocacy, continuous professional growth and operational confidence to protect the best interests of all credit unions. For more information about CUNA, visit cuna.org. To find your nearest credit union, visit YourMoneyFurther.com.
