The CFPB was born out of the Dodd-Frank Act with the purpose ofprotecting the average American from the big bad wolf – the wolf ofWall Street, that is – and the banks that have been blamed forcausing the Great Recession.

The reality, however, according to groups that solely supportcredit unions, is that the CFPB is hurting the small institutionsthat have nothing to do with causing 2008's economic crash.

The bureau was the brainchild of then-Harvard Law SchoolProfessor Elizabeth Warren, who is now a Democratic senator fromMassachusetts. Her idea was that the CFPB would fight for theAmerican people and keep lenders in check. In the beginning, the CFPB was hailed by some as a much-neededforce in the financial industry. A notable exception to that wasNAFCU, which supported consumer protections for Wall Street andpayday lenders, but felt credit unions did not need anotherregulator. CUNA, at the time, supported the CFPB but wanted creditunions to have their own regulator. What resulted was Section 1022of the Dodd-Frank Act, which authorizes the CFPB to provideexemptions to credit unions from the requirements of statutes.

The problem, CUNA said earlier this week, is that five yearslater, the CFPB is unwilling to exercise that exemption, and creditunions are feeling the burden.

Now, CUNA and NAFCU have something to agree on: Both said inletters to Congress this week that it is time to force the CFPB toenact those exemptions, and at least one member of Congresslistened.

Rep. Roger Williams (R-Texas) this week introduced H.R. 3048,the Community Financial Institution Exemption Act. According to apress release from his office, the bill would force the CFPB to“explain to community banks and credit unions why they are notexempt from certain CFPB rules and regulations as permitted in theDodd-Frank Wall Street Reform and Consumer Protection Act.”

“For the last five years, Main Street American lenders have hadto close up shop because they are incapable of spending more time,money and resources complying with costly federal regulations,”Williams said. “These institutions are vital to the success of thesmall business community, and we need to make sure they areguaranteed the protections they are granted under the law.”

According to Williams, 60% of all business loans under $1million are made by local institutions, but small financial institutions are disappearing in rising numberssince the implementation of Dodd-Frank. Williams quoted theIndependent Community Bankers of America when garnering support forhis bill and said since 2007, there have been 153 new finalregulations, 87 compliance changes and 59 annual adjustments tothresholds, with 103 proposed rules still being considered.

According to CUNA, since the beginning of the financial crisis,credit unions have been subjected to more than 190 regulatorychanges from nearly three dozen federal agencies, totaling nearly6,000 Federal Register pages.

“We believe that the bureau can and should go much further thanit has to exempt credit unions from its rulemaking, because creditunions, unlike other financial institutions, have not engaged inthe consumer abuse the Bureau is meant to address,” CUNAPresident/CEO Jim Nussle said in a letter to Williams. “Theimposition of regulations on credit unions designed to curb abuseelsewhere in the financial marketplace has the unintendedconsequence of reducing access to affordable products and servicesfor credit union members.”

CUNA said it recently conducted a survey of credit unions thatoffer or had offered international remittance transfers. The surveyshowed that nearly 23% of credit unions that had offered IRTs areno longer doing so, and 26% turn members away to stay below theCFPB's rule threshold, resulting in less than two transactions aweek. Another 12% of credit unions are considering no longeroffering IRTs.

Nussle said that while H.R. 3048 is a step in the rightdirection, he had some technical concerns with the bill. Nussle didnot address those concerns in his letter.

NAFCU also showed its support for the bill this week. OnWednesday, NAFCU said the bill is a solid step in the rightdirection for giving credit unions regulatory relief.

“NAFCU supports H.R. 3048, the Community Financial InstitutionExemption Act, as a strong first step in ensuring all credit unionsare exempt from onerous CFPB rulemaking,” Jillian Pevo, director oflegislative affairs for NAFCU, said. “Credit unions do not haveeconomies of scale that large for-profit institutions have and areoften times forced to end a product line or service rather thanface the hurdles of complying with a new regulation. NAFCU has longadvocated for CFPB exercising authority under Section 1022 of theDodd-Frank Act to provide meaningful relief to all credit unions.This thoughtful legislation brings this important issue to theforefront.”

H.R. 3048 was referred to the House Financial Services Committeeon Tuesday, and if it does pass out of the committee, will likelynot make it to the House floor prior to the August recess.