CFPB Overreach Collides With Rural New Mexico
If you need an outstanding example of what it means to be a credit union, look no further than Chacon, N.M. This little rural town, where livestock outnumber people, is not easy to locate. My recent travels there were not guided by GPS, but by advice to “take the right fork off the highway, go seven miles back toward the mountain and look for the green and white building.”
Visitors to the Tilford Memorial Mission School, long retired from educational service, on a particular Sunday in March will meet the members of the Rincones Presbyterian Credit Union who are holding their annual meeting. These strong and proud folk, some of whom drove 50 miles to attend, know the power of neighbor helping neighbor. They know who is ailing, who needs help and completely understand the concept of pooling their savings to benefit each other through credit union loans. While the credit union may be small (numbering just 756 members), they are a shining example of what it means to be a financial cooperative.
You won't find Wells Fargo or Bank of America in Chacon. What you will find, however, is a credit union staffed by three employees and a board of directors that know just about every member by name. And, unfortunately, you’ll also find the damage caused by an out of control federal regulator.
Times haven't been easy for Rincones Presbyterian Credit Union in recent years. Shut off from making mobile home and manufactured housing loans by the overreach of the CFPB's one-size-fits-all regulation for fear of not meeting compliance standards, they are just starting to get back into this type of lending.
During a meeting with the CFPB last year, when presented with a similar case study and asked about this particular regulatory block, the CFPB stated that they “regulate products, not industries.” Ultimately, what quickly became apparent was that the CFPB either is not aware of or ignored state-by-state economic and cultural context. And, subsequently, the CFPB simply doesn't understand the people, the way of life or the values of those who live in Chacon. It would be hard to describe the Rincones Presbyterian Credit Union as an industry, however when they saw their members heading to high-cost alternatives to finance mobile homes at five and six times the rate they offered, they knew something wasn't right. Why would the government want to stop them from helping their neighbors?
I never received a good answer from the CFPB on that issue, however I have continued to speak out about the impact of a system that limits access to financial products and rewards the largest financial institutions in the country.
Recently, CUNA issued a letter to the House Financial Services subcommittee on oversight and investigations stating that, “In fact, CFPB has created a rigged system in favor of the behemoth banks who can afford to spread the cost of compliance with one-size-fits-all regulation over large economies of scale.”
The letter highlights the fact that credit unions have been subjected to more than 200 regulatory changes from more than a dozen federal agencies since the beginning of the financial crisis, which “has led to rising costs and fewer choices for credit union members.”
While letters to congressional committees are important, they can never convey the reality faced by the members of Rincones Presbyterian Credit Union. The opportunity to meet with these small, but proud examples of the American way allow for deeper insight and understanding, while demonstrating the credit union maxim: People helping people. The CFPB and its director, Richard Cordray, may be very familiar with million-dollar homes on the suburban streets of Virginia, but they are woefully out of touch with the way their decisions collide with real people who only want to help each other grow their financial independence.
This is why visits to rural credit unions and speaking out on their behalf – in Washington and wherever someone will listen – remains the most powerful, effective and important method for creating a comprehensive understanding of the specific needs of a variety of communities while also giving voice to them. Because we at the Credit Union Association of New Mexico make it a priority to visit and listen to our member credit unions, I understand my credit unions and, unlike Director Cordray, can see the damage that overreaching, unintended, one-size-fits-all regulation does to real people. Perhaps it's time to spend a little less time in high-rise offices crafting over-reaching regulation, and a little more time getting to know the constituents the CFPB purports to serve.
Paul Stull is President/CEO of the Credit Union Association of New Mexico. He can be reached at 607-731-2226 or email@example.com.