I have read several articles and opinions recently looking back at the creation of the CFPB and the part credit unions played in the process. Certainly today, it would be hard to argue that the CFPB has not created an additional paperwork and regulatory burden. When talk of a new consumer protection agency started here in Washington back in 2009, my first reaction was likely the same as many others working in and around the financial services industry. I was wary of increased regulatory burden and was certain we did not need another layer of bureaucracy and red tape. Regardless, we were certain there would be a substantive and swift reaction to the 2008 meltdown. In the lead up to Dodd-Frank, and the subsequent creation of the CFPB, CUNA worked closely with credit union industry representatives across the country to assess the political realities and develop a strategy to navigate through a rapidly changing landscape.
At CUNA we weighed the likelihood that the CFPB would become a reality and the extent to which it would have authority over credit unions. With a newly elected president and new majorities in the Senate and the House, it was more than reasonable to conclude that something was going to be enacted into law and that credit unions could not avoid inclusion. It should also be noted that the credit union system was not united on many aspects of Dodd-Frank including the creation of the CFPB. In fact several of the system's largest credit unions were on opposite sides of the issue.
For this reason, CUNA engaged the leaders in the Senate and the House to seek credit union friendly modifications to the pending legislation, and testified three times on the proposal. Once we realized the force behind creation of the CFPB and the fact that credit unions would be included in its focus, working against it completely would have been a fool's errand, akin to advocating for an endless summer. Of course it sounds great and many people would be on board, but the prudent citizen would prepare for Fall and Winter as usual.
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One benefit of being engaged at the beginning is that to this day CUNA has a credible voice in dealing with the CFPB instead of being completely at odds and out of the conversation. I know that within any regulated industry there are those who believe that working with regulators is akin to sleeping with the enemy. Some maintaining this position may never be satisfied with any level of engagement. I personally am proud of CUNA's active involvement and negotiations on the legislation and look back with a great sense of accomplishment. We were able to achieve positive changes on behalf of credit unions at a time when Congress and many consumers were on the warpath against the financial services industry.
Some will recall that the original legislation would have given the CFPB authority to examine credit unions with more than $1 billion in assets, while at the same time establishing a $10 billion threshold for banks. CUNA's leadership led to that threshold being increased to $10 billion, protecting hundreds from CFPB examination. Early versions of the CFPB legislation also required financial institutions to offer plain vanilla products to members before offering them a product that would better meet a member's need; thanks to our intervention, that provision was not included in the final legislation.
Those were not the only improvements we achieved. One can place the original bill next to the enacted legislation and easily see how the legislation improved for credit unions throughout the process. Credit unions do not pay for the operation of the bureau; they are not required to submit deposit account data to the bureau; and, the bureau is required to address outdated, unnecessary and unduly burdensome regulation with an eye toward reducing regulatory burden — a provision that was first suggested by CUNA. Had CUNA been on the sidelines, and not at the table, these improvements would not have been possible.
Second guessing in politics is a great American sport. Legislation that was unstoppable in 2009 would be impossible in 2015. I am absolutely certain that if CUNA had just opposed the legislation, we would have the CFPB without the aforementioned beneficial changes.
Quixotic opposition is not a winning advocacy strategy. Rather, a better strategy is one that is secured by understanding the art of the possible.
Dan Mica is principal of the Washington-based lobby and strategy firm The DMA Group. He can be reached at [email protected] or 202-643-7309.
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