The new Consumer Financial Protection Bureau doesn’t even begin operations until July and already CUNA and NAFCU and some on Capitol Hill are pushing for changes in how much power it has and what its structure will be.
House Republicans want the bureau to be run by a five-member board, with a chairman appointed by the president, rather than a presidentially appointed director. They have also introduced a measure to make it easier for the council of regulators to overturn rules issued by the bureau, which will be an independent agency housed inside the Federal Reserve.
CUNA and NAFCU are approaching the legislation differently. CUNA isn’t taking a position on whether the bureau is run by a board or an individual, but if Congress goes the board route, the trade group wants to ensure that one board member has credit union experience. NAFCU favors having the bureau run by a board.
Both groups favor changing the law to allow a simple majority of the members of the Financial Stability Oversight Council to overturn bureau regulations, rather than the current two-thirds.
Credit union executives representing the groups offered their suggestions during an April 6 hearing of the House Financial Services Committee’s subcommittee on financial institutions and consumer credit.
State Employees Credit Union of Maryland President/CEO Rodney Staatz, representing CUNA, told the panel that the changes will help achieve the association’s goals of a "regulatory regime in which consumer protection is maximized and regulatory burden is minimized."
Washington Gas Light FCU President/CEO Lynnette Smith told the panel the bureau is "potentially problematic" and will create "burdensome and unnecessary" compliance costs. She testified on behalf of NAFCU.
Subcommittee Chairman Shelley Moore Capito (R-W.Va.) said she empathizes with the regulatory burden faced by community banks and credit unions and wanted to be sure that Congress did what it could to add to that.
Capito noted that even as the consumer bureau is getting ready to begin working, the individual banking regulators are still keeping their consumer protection offices, and this could lead to duplication and to extra work for financial institutions. She also criticized President Obama for not having named a permanent director for the bureau.
In response to a question from Capito, Smith said it takes her staff at least 30 days to prepare for her credit union’s NCUA exam and 30 days to prepare for her annual outside audit. She said that the NCUA does a good job of keeping her credit union on the straight and narrow, and it doesn’t need additional exams or oversight by the new bureau.
She also told lawmakers that the increased regulatory burden was one of the reasons that there are fewer credit unions, and this is worrisome because credit unions are often the lenders of last resort.
Staatz suggested that the current $10 billion in assets threshold for mandating that financial institutions be directly examined by the bureau should be indexed for inflation. That differs from NAFCU’s approach, which is to raise the threshold to $50 billion.
Staatz also recommended that lawmakers require regulatory agencies to demonstrate each year how they have reduced the regulatory burden of financial institutions and mandate that the bureau study on statutory and regulatory improvements for reducing compliance burdens.