The head of the Consumer Financial Protection Bureau and South Dakota's U.S. senator, Tim Johnson, received an earful Wednesday regarding the heavy compliance burden on credit unions as well as community banks emanating from Dodd-Frank and other new federal laws and which is triggering a spate of mergers.

In unusually candid remarks at a quietly-called Sioux Falls roundtable, a string of top managers from South Dakota credit unions and small banks complained that the ”mountain of new regulations-18,000 pages over the past three years – coming out of Washington D.C.” is driving numerous mergers of smaller institutions unable to bear the cost.

More than 100 bank and CU top managers attended the session on a university campus conducted by Richard Cordray, CFPB director, and Sen. Johnson, a Democrat and chairman of the Senate Banking Committee.

Leading the testimony for the Credit Union Association of the Dakotas as a participant was Jeff Schmidt, chief operating officer of the $68 million Voyage CU, itself the product of a 2011 merger.

“During 2011 we saw five credit unions–almost 10% of the total– involved in mergers and in each of the five mergers, management and volunteers cited regulatory burden as a primary reason to merge,” declared Schmidt who also serves as the state's chairman of CUAD's Governmental Affairs Committee.

“I am sure that it isn't a shock to you Mr. Cordray or anyone else at the CFPB that credit unions are subject to substantially more regulation now than just a few years ago but what I think might surprise you is that of the 46 credit unions left in South Dakota, 24–more than half–have six employees or less,” said Schmidt.

The wave of new regulations has overwhelmed the staffs of these small credit unions prompting them to look for mergers, he said.

“These credit unions don't have an attorney on staff, they don't have a team of full time compliance specialists, and they don't have the manpower to read and comment on 18,000 pages of proposed rules, interpretive rulings or policy statements,” said Schmidt.

Of the 100 attendees, some 70 were CEOs of banks who voiced also voiced concerns about mergers but hit on mortgage rules hindering their operations, officials said.

“It also was just limited to South Dakota financial institutions,” said a spokesman for the CUAD noting apparently a desire by CFBP and the senator to keep a local focus “rather than bring in North Dakota or Minnesota representatives.”

Schmidt told Credit Union Times he thought the meeting was productive “in that they heard our concerns” but as one participant put it, “let's see where this goes from here.”

Instant Insights /

Dakota Credit Unions Air Compliance Gripes at Special CFPB Roundtable

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