WASHINGTON – Last week’s debate over a Consumer Financial Protection Agency, coming on the heels of a variety of efforts to rein in overdraft protection programs, abusive credit card practices and the growth in interchange fees shows just how credit unions have been inadvertently drawn into much broader efforts to re-regulate financials services.
"There’s so many issues these days where the big banks are the effective targets and the small banks and others are being drawn in," said Ryan Donovan, senior lobbyist for CUNA, who was lobbying the House Financial Services Committee last week for an exemption from the proposed consumer agency for credit unions.
Lawmakers made it clear last week they may be unintentionally drawing credit unions and community banks into new consumer protection legislation primarily aimed at the handful of large banks that dominate the markets for mortgages and credit cards they are seeking to re-regulate. Rep. Barney Frank, the chairman of the financial services panel, acknowledged that credit unions and community banks are being deeply affected by legislation being aimed at a small number of larger players.
Rep. Brad Miller, one of the advocates of increased regulation, agreed and he worried that credit unions and small banks would be drawn into the oversight scheme of the proposed consumer agency, which is being sought to address predatory practices in the mortgage, credit card and investment arenas that some believe helped cause the economic crisis. The proposed consumer agency, said Miller, "will create a needless burden on community banks and credit unions, who for the most part, did not cause the problem," said the North Carolina Democrat, who proposed to exempt most credit unions and banks from the new agency.
"Smaller banks and credit unions have not been without sin, but they have not been the bad actors," said Miller, who asserted under his plan exempt credit unions and banks would continue to be monitored for compliance with consumer laws by their existing regulators. For credit unions that will be NCUA or their state supervisors.
Still, Miller’s attempt last week to exempt most credit unions, those over $1.5 billion–all but about 75 credit unions--from the Consumer Financial Protection Agency, was unacceptable to the credit union lobby who want all credit unions exempt. The Miller proposal was adopted by the committee, which is expected to finish its work on the bill this week and send it on for a vote by the full House.
"We don’t think it goes far enough," said Dan Berger, chief lobbyist for NAFCU, adding that NAFCU hopes as the bill is voted out of the committee and moves to the full House, or even afterward when it reaches the Senate, they will convince lawmakers to extend the exemption to all credit unions.
"Look, credit unions didn’t cause these problems and so shouldn’t be drawn into this legislation that is aimed at those who did," Fred Becker, president of NAFCU, said of the various legislative initiatives on mortgage cramdowns, credit card regulation, overdraft protection and interchange fees he has been defending against.
