Congress Often Prods Regulators to Do What Lawmakers Can't or Won't
The reality is a bit different.
Whether it has been giving consumers more protections from the abusive practices of some credit card companies or getting credit unions to be more transparent, the NCUA has responded to lawmakers' inquiries by passing policies that reflect the congressional agenda.
In recent years, this has happened when both Democrats and Republicans have controlled Congress.
The most recent example is on credit cards.
In May, with great fanfare, the Fed, the NCUA and the Office of Thrift Supervision issued a series of regulations designed to curb practices it defines as "unfair and deceptive," such as double-cycle billing, raising interest rates on existing balances and inadequate disclosure of fee structure details. The public comment period for those regulations just ended and final rules are due out before the end of the year.
The regulators' actions were a response to written and oral communication from key lawmakers--including Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.)--in which they urged strong measures and gave the regulators considerable leeway.
So that Congress' intentions were not in doubt, in late July while the comment period was still open, the House Financial Services Committee passed a measure on credit card practices that contains many of the same provisions as the regulations issued by the three agencies. Legislative strategists at CUNA and NAFCU said the action was more symbolic than substantive, since there is too little legislative time left for lawmakers to pass the measure this year and the Bush administration opposes the bill.
NCUA Vice Chairman Rodney Hood said he and other regulators don't usually feel that congressional input amounts to excessive pressure.
"Whenever there are issues of concern surrounding safety and soundness and consumer protection, we are interested in what our stakeholders have to say, and Congress is certainly a stakeholders,'' he told Credit Union Times. "Members are under pressure from the speed of communications from constituents and the 24-hour news cycle, and sometimes that means they want to do things on an expedited basis. So the pressure on regulators comes in terms of doing things quickly.''
Hood added that because his agency is self funded--with its operating budget coming from examination fees and interest on the share insurance program--that gives Congress less clout than it has over other agencies, whose purse strings it controls more closely.
CUNA Deputy General Counsel and Senior Vice President for Regulatory Affairs Mary Mitchell Dunn said most of the regulations from the NCUA and the government's financial services regulators originated in one form or another from Capitol Hill.
"Congress is definitely the elephant in the room in terms of regulations,'' she said.
NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt said Congress pushes regulators in part because it is easier to enact a regulation than pass a law. She added that this has sometimes produced unintended consequences, such as placing restrictions on credit unions when they haven't caused the problem that needs to be solved.
"On credit cards, credit unions got swept up by rules that were unnecessarily burdensome and cause operational problems,'' she said.
Hunt added that on the positive side, the focus on safety and soundness issues by Congress has promoted the NCUA to increase public awareness of its deposit insurance, which the public has been more concerned about because of some highly publicized bank failures.
Although Democrats are sometimes more eager than Republicans to encourage new regulations, one of the NCUA's most prominent initiatives, the Outreach Task Force, was the result of concerned express by the GOP-controlled Congress and its investigative arm about the efforts of credit unions to help the underserved.
A contentious House Ways and Means Committee hearing in November 2005 about the tax-exempt status of credit unions featured critical comments from the banking industry and some lawmakers.
At that session, then-Chairman Bill Thomas (R-Calif.) said he wouldn't push to repeal credit unions' tax-exempt status but asked the Government Accountability Office--Congress' investigative arm--to examine how well credit unions were serving underserved areas and whether they were collecting or disclosing enough financial data.
A year later, the GAO concluded that "credit unions lagged behind banks in serving low- and moderate-income households. The report also concluded that "credit union executive compensation is not transparent.''
That prompted the NCUA to create the task force to examine how credit unions were meeting their goals of serving underserved populations and whether they were disclosing enough data on their memberships or salaries. The task force recommended that credit unions be required to disclose a summary of their members' financial and income information and the salaries of their top executives.
In May, the board approved rule changes recommended by the task force requiring federal credit unions to submit data about the financial characteristics of their members and the services they provide to them. Hood opposed the proposal and said it would be imposing "CRA-lite burdens on credit unions."
The Community Reinvestment Act requires banks to demonstrate that they are providing services to underserved populations. The act does not apply to credit unions, which are subject to the Federal Credit Union Act, which mandates their work in low-income areas or those with large minority populations.
Frank, who is generally supportive of credit unions, has said he may try to broaden the reach of CRA to include credit unions.
That could happen if there is Democratic Congress and Democratic president next year.
Hood said it's a two-way street, and regulators often go to Congress to push their policy goals.
Earlier this year, the NCUA added a deputy in its office of congressional and public affairs, a former top aide to the last Republican chairman of the House Financial Services Committee.