NCUA and Other Agencies Gear Up for Dodd-Frank Act Enforcement
The Consumer Financial Protection Bureau probably won't be up and running until early next year, but the NCUA, other agencies and the credit union trade associations are already starting to gear up.
NCUA Chairman Debbie Matz participated in a July 29 meeting of other agency heads with Treasury Secretary Timothy Geithner to determine staffing requirements of the CFPB. The NCUA is expected to lose some personnel to the new agency.
Even though the CFPB will only have direct supervisory authority over three credit unions-Navy Federal CU, Pentagon FCU and State Employees' Credit Union-the rules and regulations it writes will be applicable to all credit unions.
Matz and other agency officials have said it's too early to tell how many NCUA employees will be shifted, but she expressed optimism that the new entity will improve consumer protection overall.
"This new bureau is a tangible manifestation of a new commitment to sensible and effective consumer protections. I am confident that consumers will benefit from an enhanced ability to understand an often complex and confusing landscape of financial products; and I am equally confident that NCUA's efforts to protect credit union members will be augmented by our work with the CFPB," Matz said in a statement.
Geithner must transfer regulatory functions to the new agency between six and 12 months after the bill was enacted. President Obama signed it into law on July 21.
Obama hasn't named the new director of the CFPB, which will be housed in the Federal Reserve but as an independent agency.
The two names most often mentioned as possible agency heads are Assistant Treasury Secretary for Financial Institutions Michael Barr and Harvard Law Professor Elizabeth Warren.
Barr was a key architect of and negotiator with Congress on the regulatory overhaul bill. CUNA and NAFCU staff members who have met with him said he has been willing to listen to their concerns even when he disagreed. Barr, who also served as a deputy assistant treasury secretary during the Clinton administration and is on leave from the faculty of the University of Michigan Law School, is a strong advocate for administration positions, but he expresses his views in a low-key manner.
Warren, who came up for the idea with the CFPB in an academic journal article, is the favorite of many consumer groups in part because of her strong criticisms of certain financial institutions and credit card companies. CUNA and NAFCU officials have said she has been willing to meet with them but doesn't back down from her views. Warren has clashed with some administration officials-including Geithner-in her role as chairman of the congressional panel that is overseeing the Troubled Asset Relief Program.
While many of the decisions affecting credit unions will take place at the CFPB, the Federal Reserve will continue to play an important role as well. That's ?why CUNA and NAFCU have sent an array of letters, though both groups spent a great deal of time on interchange fees.
CUNA sent the Fed a four-page memorandum laying out its concerns on the potential impact of lower interchange fees on smaller card issuers, such as credit unions.
The association recommended that the rules ensure that "merchants will not reject small issuer cards or encourage on a discriminatory basis, consumers to use cards issued by large issuers, thereby undermining the exemption for small issuers."
When the Fed sets interchange fees, CUNA contends that the legislative language doesn't require the agency to limit the fees to incremental costs but should consider those costs during the rules writing process. CUNA also urged the Fed to consider the extensive fraud prevention costs incurred by credit unions-which are paid for by interchange fees-when determining interchange fee structures.
NAFCU President/CEO Fred Becker urged the agency to consider the effect of limits on interchange fees on credit unions' operations. He even invoked a principle of Newtonian physics to buttress his argument.
"In business, each action creates an equal and opposite reaction. The interchange fee provisions do include an exemption for institutions with less than $10 billion in assets. However, the legislation also affects a massive, interconnected network of card companies, issuers, merchants and consumers. Simply put, the changes necessary to allow the system to continue to function cannot be made in isolation," Becker wrote.