Future of MBL Hike and Consumer Protection Agency Is Unclear
Credit unions are hoping that President Obama's latest endorsement of a new agency to regulate consumer products won't be enough to push it through the Senate.
Obama reiterated his support for the Consumer Financial Protection Agency during a meeting last week with Senate Banking Committee Chairman Christopher Dodd (D-Conn.) whose panel is currently writing its version of a measure to restructure the way financial service firms are regulated. An unidentified White House aide told The New York Times that the CFPA is "non-negotiable."
But lobbyists for CUNA and NAFCU contend that Obama may be forced to yield because of the Senate Republicans' unanimous opposition to the CFPA and because several Democrats have also expressed concern about creating a new regulatory agency.
"The biggest goal will be to bring predatory lenders under a regulatory rubric since they are the ones that caused the crisis," said NAFCU Executive Vice President Dan Berger. "As the sausage making goes on, there will be lots of options being considered. But creating a large new regulatory agency will have a hard time passing the Senate."
CUNA Vice President Ryan Donovan said while the CFPA has always been a top priority for the administration, he is "not sure they have reached a final decision as to whether they would accept a package that doesn't have a CFPA in it."
In December, the House passed a regulatory overhaul measure that includes the CFPA. Most credit unions wouldn't be subject to examinations by the new agency, but the NCUA would be responsible for enforcing the regulations.
Obama reiterated his support for the CFPA a few days after proposing a tax on large banks to pay for the costs of the bailout of financial institutions.
Members of Dodd's committee and their staffs are drawing up a regulatory overhaul bill that the committee is likely to begin discussing in February.
On member business lending, credit unions and banks escalated their war of words as lawmakers were considering whether to include in a jobs creation bill a provision raising the cap on member business lending from 12.25% of assets to 25%.
Raising the cap on member business loans is risky in light of the problems facing credit unions and would take away businesses from "tax-paying community banks,'' Independent Community Bankers of America Senior Vice President Stephen J. Verdier wrote senators last week. He also urged lawmakers to reduce the deficit by taxing credit unions.
CUNA and NAFCU countered with letters containing data showing that credit unions could pump much needed capital into the economy and create new jobs. NAFCU's letter criticized the banks' "shameless opposition'' to raising the cap.
CUNA's Donovan said in his conversations with staff members he is seeing "some momentum" for including the cap increase the jobs bill but realizes it's a difficult battle.
Berger said in an election year, congressional leaders don't like to force their members to choose between banks and credit unions "but this year could be different because the banks aren't lending."