Credit unions dodged a big bullet but still face potential additional regulatory burdens under the bill to revamp the way financial services are regulated unveiled last week by Senate Banking Committee Chairman Christopher Dodd (D-Conn.).
The NCUA would remain a separate agency and not part of a consolidated bank regulator but credit unions would face an additional layer of regulation and examination by the Consumer Financial Protection Agency.
While the NCUA would remain the safety and soundness regulator for credit unions, it would lose some of its jurisdiction on consumer issues to the CFPA. The bill mandates that the CFPA assess fees on financial institutions with assets greater than $10 billion, including credit unions, and says the agency can assess fees on those with assets of $10 billion and smaller.
There is no carve out for smaller credit unions and community banks as there is in the bill passed last month by the House Financial Services Committee.
"On CFPA, this bill is similar to where the House bill was when it started. There is much work that needs to be done on it on the Senate side," said CUNA Vice President for Legislative Affairs Ryan Donovan.
Under Dodd's bill, the CFPA would be run by a five-member board, while the House bill envisions it run by a director.
Dodd's bill would also allow states to pass tougher consumer law than the federal government and prevents federal law from preempting state laws. That has been a source of concern to federally chartered financial institutions that operate across state lines.
Under the provisions of the bill passed last month by the House Financial Services Committee, national banks would have to comply with state laws, even if they are tougher than federal laws and regulations, unless their federal regulator determines that the state law or regulation places the institution at a competitive disadvantage against state-chartered institutions.
NASCUS President/CEO Mary Martha Fortney said her group is reviewing the legislation to assess its impact on state regulators and state-chartered credit unions. She said that her association is "concerned about preemption and state authority issues in regulatory reform efforts and will continue to express our concerns and perspectives to Congress as legislation moves forward in the House and Senate."
Dodd's bill also includes credit unions in the payment, clearing and supervision section on mitigating systemic risk.
This is a source of concern for the credit union trade groups
NAFCU Executive Vice President for Government Affairs Dan Berger said because credit unions "make up such a small, small part of the financial services arena, we continue to believe to be considered part of the systemic risk consideration is unnecessary."
Dodd's bill would create an Agency for Financial Stability to oversee threats to systemic risk.
Both the bill being considered by the House Financial Services Committee and Dodd's bill create an FDIC-run fund to deal with systemically risky companies that would be financed by assessments on institutions with more than $10 billion in assets, including credit unions. CUNA and NAFCU have said they will fight that provision, even though it only impacts three credit unions: Navy Federal CU, Pentagon Federal CU and State Employees CU.
Dodd's bill also envisions a major restructuring of the regulatory architecture in Washington. It would combine the regulatory powers of four existing agencies over banks and thrifts into the Financial Institutions Regulatory Administration. The four agencies that would lose those powers are the Federal Reserve, the FDIC and the Treasury Department's Office of the Comptroller of the Currency and its Office of Thrift Supervision.
It would also give Federal Reserve governors the power to appoint presidents of the Fed's 12 regional banks. Currently, presidents are appointed by commercial banks in the region.
Although Dodd's bill enjoys widespread support among Democrats-nine of the 13 Democrats on his committee joined him at the news conference unveiling the measure-the Republicans have expressed concern.
The panel's senior Republican, Richard Shelby of Alabama, and other Republicans have strong concerns about the CFPA but say they are eager to work with Democrats to try to find a common solution.
Committee member Bob Corker (R-Tenn.) told CNBC that while the "consumer protection piece is on steroids and needs to be beaten back," there is an opportunity to reach an agreement.
Dodd's committee is likely to begin consideration of the measure in December. House Financial Services Committee Chairman Barney Frank (D-Mass.) has said he hopes that the full House will consider the legislation that is currently working its way through his committee during the first week of December.
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