The Senate last Thursday overcame strong Republican oppositionand passed comprehensive regulatory overhaul legislation 60 to 39.All but one of the 58 Senate Democrats supported the measure, andall but three of the chamber's 41 Republicans opposed it. The Househad passed the measure on June 30.

Now comes the even harder part.

Because the bill will touch on all sectors of the financialsystem, policy experts and credit union specialists are stillworking out the implications for credit unions.

The areas of the legislation likely to have the greatest impacton credit unions are the creation of the new Consumer FinancialProtection Bureau and the granting of the power to regulateinterchange fees to the Federal Reserve.

The CFPB, which will be housed in the Fed, is mandated by thebill to issue at least 24 sets of rules, according to an analysisby the law firm of Davis Polk & Wardwell. All credit unionshave to comply with the bureau's rules and regulations, but thebureau itself will only handle the enforcement at credit unionswith assets of more than $10 billion. Enforcement at all othercredit unions will be handled by the NCUA.

Former NCUA Board Member Geoff Bacino said the new rules willincrease compliance costs and cause a realignment ofresponsibilities at many credit unions.

“There will be a range of additional things they will have to doto comply and there is no doubt that the NCUA will be enforcing therules closely,” he said. “Because of the additional rules, thecompliance people and internal auditors will be even more importantcogs in the credit union machine.”

The CFPB will assume the consumer protection functions of mostexisting government agencies and is expected to draw personnel fromthose agencies.

John McKechnie, NCUA director of public and Congressionalaffairs, said it remains to be seen how many NCUA employees will goto the bureau. The agency created an Office of Consumer Protectionat the beginning of this year with 33 full-time equivalentemployees.

Davis Polk estimates that the federal government will issueapproximately 243 new sets of rules, most of them coming from theSecurities and Exchange Commission and the Commodities FuturesTrading Commission.

In addition, the law requires 67 one-time studies and 22additional periodic reports.

The path to passage was rocky at times.

When President Obama unveiled his initial proposal in June 2009,credit unions felt they dodged a bullet because the NCUA was keptan independent agency, and that never changed throughout thelegislative process.

However, CUNA and NAFCU went to work to lessen the impact of theproposed CFPB, which Obama originally wanted to have as astand-alone agency.

The trades were able to secure an exemption from directexamination for credit unions with assets equal to or less than $10billion.

The House passed an initial version of the bill Dec. 11, mostlyalong party lines. Action in the Senate was slower and SenateBanking Committee Chairman Christopher Dodd (D-Conn.) didn't unveila bill until March.

The Senate passed a bill on May 21 and during deliberations inthat chamber CUNA, NAFCU and NCUA succeeded in obtaining severalamendments that benefited credit unions. One such amendment gavethe NCUA chairman a seat on the council empowered to determine if afailing institution poses a systemic risk and to hear appeals ofrules issued by the CFPB. Another eased some of the demographicdata reporting requirements.

The Senate also added an amendment on interchange, whichprompted a full-blown but ultimately unsuccessful lobbying campaignby credit unions.

A conference committee spent most of June reconciling the Houseand Senate versions of the bill. In the end, most of the provisionspushed for by CUNA and NAFCU survived, but so did the interchangeprovision, which prompted them to oppose the bill.

Bacino said that while the loss of interchange revenue will hurtcredit unions in light of the sluggish economy, he hopes it willencourage some of them to adjust their revenue models to be lessreliant on interchange fees.

The House approved the revised version of the bill on June 30,mostly along party lines.

Final passage in the Senate proved more difficult.

Although Democrats have 58 seats (including two independents whocaucus with the party), the rules of the chamber require 60 voteswhenever the minority party wants to filibuster, as the GOP did inthis case.

And with Sen. Russ Feingold (D-Wis.) criticizing the bill as nottough enough, the Democrats needed to win some Republicansupport.

To accomplish this, they reopened the conference committee toeliminate a tax increase strongly opposed by Sen. Scott Brown(R-Mass.).

Brown ultimately announced his backing of the bill, as did Sens.Susan Collins and Olympia Snowe (R-Maine).

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