WASHINGTON-In a unusual political situation, two of the three credit union giants that would come under the new Consumer Financial Protection Agency (CFPA) are saying they are OK with that, even while the two credit union lobby groups, CUNA and NAFCU, are committed to fighting Congress to exempt them from the scheme.
"I am in favor of CFPA, absolutely," said Frank Pollack, president of $14-billion Pentagon FCU. "I actually think credit unions are going to come out looking good."
Both Pollack and Jim Blaine-president of $20-billion North Carolina State Employees' CU-said they do not object to a proposed exemption for credit unions under $10 billion and will not join lobbying efforts to raise the exemption to include all credit unions. "We don't object to being brought under CPFA. We're 100% behind it," said Blaine, who noted that his credit union is already examined by as many as a dozen government agencies, from NCUA, to the Federal Trade Commission, to the Department of Housing and Urban Development, as well as state credit union supervisors.
The third of the three affected credit unions, $45-billion Navy FCU, said it does favor an exemption for all credit unions, which would leave NCUA as its examiner for consumer compliance. A Navy Fed spokesman said the nation's largest credit union feels that credit unions should not be brought under the CFPA because they did not cause the financial crisis and are in favor of boosting the exemption to $50 billion, to be indexed to inflation.
A Peculiar Position
The situation leaves the two credit union lobby groups in a peculiar position.
CUNA is committed to pushing to exempt the three giants as well, even though it only represents one of the three, SECU (Navy and Pentagon have disaffiliated from CUNA). So none of the three powerful credit union heads have asked CUNA to lobby for the exemption.
And only one of the two represented by NAFCU (SECU is not a NAFCU member) wants the group to lobby for the increased exemption.
Ryan Donovan, senior lobbyist for CUNA, said the trade group will continue to stress the principle of a unified position for credit unions. "As a matter of policy we don't like credit unions separated by asset size," he told Credit Union Journal. For many years, the banking lobby has tried to split the credit union movement by arguing to Congress that large diversified credit unions should be subject to taxes.
CUNA also noted that as many as 10 other credit unions could hit the $10-billion mark over the next few years and would be subject to the CFPA under the current proposal.
NAFCU President Fred Becker agreed. "We don't think credit unions should be divided on the basis of asset size," said Becker, who said they will continue to lobby Congress to get all credit unions brought under the exemption from CFPA
The bill, introduced last week by Senate Banking Committee Chairman Christopher Dodd (D-CT) would create a consumer financial protection bureau but instead of an independent agency preferred by President Obama, the agency would fall under the Federal Reserve.
The bureau would ostensibly be independent of the Fed but be funded by the Fed's budget. It would write all consumer regulations, just like the Fed does now, but the current regulators would have examination powers over all institutions under $10 billion.
As the Fed does now, the bureau would write consumer regulations on mortgage, credit cards, deposits and other financial products and services, which would be tailored by NCUA and the banking regulators for their specific oversight. While NCUA or state credit union supervisors would examine CUs under $10 billion for compliance with the regulations, the bureau would have ultimate enforcement authority.
Concern Over State Preemption
NAFCU last week said it is concerned about language in the Dodd bill that would give states preemption over federal consumer laws, with respect to the activities of federally (nationally) chartered institution. In recent years federal courts and agencies, including NCUA, have ruled that federal laws preempt federally (nationally) chartered institutions from having to comply with state laws, such as those on subprime mortgages, that vary from the national standards. The proposed bill would give the states power to enact tougher laws and would require federal charters to comply.
NAFCU said it will lobby to get language inserted in the bill that would allow NCUA to preempt state laws if it felt that a state law "prevents or significantly interferes" with the ability of a federally chartered credit union to operate.
NCUA, expecting efforts to bring credit unions under the new agency, budgeted $1.5 million to create its own office of consumer affairs beginning this year that will do many of the same things the new bureau will do, including investigate consumer complaints and sponsor financial education programs for consumers.
