Editor’s Column: Regs Must Protect and Serve
In life you depend on a lot of people. Your family and friends, your doctor and your banker, for example. They’re there to keep you healthy, and even sane at times, and your important belongings safe. These people in your life have been there with you and worked to earn your trust by providing assurances when needed, advising on difficult decisions and following through to the best of their abilities on their promises.
Unfortunately for financial services consumers, sometimes the mountain of regulations can get in the way of them doing their jobs. Especially smaller financial institutions, like most credit unions, can get buried under the regulatory burden until their ability to serve their members with conversation while assisting with a deposit (also a cross-selling opportunity) or coffee over loan papers vanishes.
When employees are worried about whether they had the member fill out the proper forms to the letter or stressed over whether they made certain disclosures, it hampers their ability to behave naturally and cultivate a trusting relationship.
The Consumer Financial Protection Bureau is proposing many regulations (see our stories on page 1) that could further impair your employees’ ability to establish better relations with the very people it purports to be protecting. As it is, credit unions could be out of the remittances picture all together, a product line where they particularly serve as a governor on pricing and expanding service to those of modest means. These consumers are exactly the people credit unions were founded to serve, and here the CFPB is protecting them from the scary credit unions.
In its favor, the CFPB has attempted to streamline some regulations, such as the attempted combining of TILA and RESPA disclosures. However, in this case the founding statutes have requirements that seemingly have made the task impossible. This is the type of technical correction legislation that should sail through Congress as a winner for financial institutions and consumers that credit unions and other lenders can get behind. Politics heightened as they are in as election time nears will likely prevent much of anything getting through, but this is really a no-brainer.
But the elections are not the only political issue facing CFPB regulation. Some are still questioning the constitutionality of Richard Cordray’s recent appointment to head up the bureau. Cordray’s recess appointment was announced while the Senate was in pro forma session, a political maneuver by the GOP to prevent President Obama from making any recess appointments. No one has challenged Cordray’s appointment in court yet, but a similar case is being watched closely by observers, so stay tuned. What happens to any regulations that come out of the CFPB if Cordray’s appointment gets overturned?
In the meantime, credit unions will have to ensure appropriate investment in training is made so employees are best equipped to juggle their regulatory duties with creating a lasting bond between the credit union and the member.
Credit unions are also going to have to deal with the 12.25% member business lending cap just a bit longer it seems (see our page 1 story). Senate Majority Leader Harry Reid’s promised vote on the business lending bill has been delayed for a few weeks—at least. Making lawmakers choose sides between credit unions and banks right before election time is a high stakes game to play, but after eight years, it’s a gamble worth taking for the jackpot. In this case, credit unions’ jackpot is increasing the member business lending cap to 27.5% of assets for financially healthy credit unions.
However credit unions are not the sole or even the biggest beneficiaries of the legislation to expand member business lending as demonstrated by the support they have received from small businesses, their associations and consumer advocacy groups. I haven’t seen much if any support from groups for those in favor blocking credit unions from expanding their business lending. This clearly portrays exactly who the banks are serving in blocking it. The banks. And the members of Congress who are siding with the banks are exhibiting their true colors as well.
The regulatory machine, in a nut shell, is simply about keeping honest people honest, but the restrictions have to stop at cutting off viable lines of business and service to credit union members. Credit union leaders must participate in the political, legislative and regulatory processes so credit unions aren’t locked into an outdated or overly restrictive regulatory scheme. Your members depend on it.