A year after what NCUA Chairman dubbed "the year of regulatory relief" credit unions are still looking for regulatory relief—but with mostly CU-friendly proposals on tap at NCUA, the focus for reg relief is on the Consumer Financial Protection Bureau.
Indeed, a number of sources at NCUA have long bemoaned that the majority of regulations that credit unions are complaining to the agency about weren't promulgated by NCUA but by CFPB (with the notable exception, of course, of the risk-based capital rule).
With 2016 underway, credit unions and their lobbyists have their sights more firmly set on the CFPB, which one trade group labeled as a primary villain in the ongoing decline in the number of credit unions.
"The impact of the compliance burden, in particular the growth of CFPB rulemaking, is evident as the number of credit unions continues to decline, dropping by more than 17% (more than 1,280 institutions) since the second quarter of 2010," NAFCU President and Chief Executive B. Dan Berger wrote in a letter to President Obama.
Of course, this time last year, the focus was squarely on Alexandria, Va., where NCUA officials were hard at work crafting a controversial risk-based capital scheme. Designed to require institutions that engage in higher-risk lines of business to hold more capital, the rule was enacted in October, ending months of heated debate.
Around the same time, CFPB's refused to exempt credit unions from expanded reporting requirements that are part of a new Home Mortgage Disclosure Act rule the agency plans to implement in January 2018. The industry is still smarting over the rebuff.
"With every additional regulation, credit unions are forced to place more emphasis on compliance and less on providing needed financial services to their members," Berger noted in his letter to the president "One reason for the decline [in credit unions] is the increasing cost and complexity of complying with the ever-increasing onslaught of regulations."
It's not just NAFCU that is up in arms.
After CFPB released its HMDA rule, CUNA announced support for a restructuring plan that would eliminate the agency's director, shifting leadership responsibility to a five-member board.
Mary Mitchell Dunn, a partner at Washington, D.C.-based law firm CU Counsel and a former senior vice president and deputy general counsel at CUNA, said NCUA should continue to engage in efforts with the CFPB to press the point credit unions pose little to no threat to consumers.
A more consultative relationship between the two agencies might help support that credit unions don't need new rules to protect their members, Dunn suggested.
"If there are one or two outliers harming consumers, we need to address that, but it's not typical among credit unions and the CFPB knows that."
Ironically, given how hotly credit unions contested risk-based capital throughout 2015, they are likely to be delighted with the big-ticket items that comprise the bulk of NCUA's 2016 itinerary. The regulator is expected to finish overhauling regulations governing member business lending and the fields of membership for federal credit unions. The proposed changes would make it markedly easier to book commercial loans and add new members. Both have won the endorsements of CUNA and NAFCU—and the ire of bankers, who have flooded the agency with comment letters critical of the measures and even gone so far as to threaten legal action should NCUA proceed as planned.
NCUA has also pledged to revise its supplemental capital regulation before the risk-based capital rule takes effect in 2019 but it has yet to release a draft for comment. "I keep hearing it gets pushed further and further back," Geoff Bacino, a former board member and now a partner at consultant Bacino & Associates, said Thursday in an interview.
According to Bacino, the items that comprise board's 2016 agenda probably won't grab the industry's attention the way risk-based capital did in 2015—and that situation did not arise by chance, he added, noting 2016 is a presidential election year.
But President Obama's decision to uproot NCUA Board Member J. Mark McWatters, who has barely served two years of his six-year term, and appoint him to serve on the Export-Import Bank Board instead, has recaptured credit unions' attention. The stunning decision to pull McWatters off of one agency to serve on another is all the more attention-grabbing since Matz's own tern expired back in April and has been serving as a holdover for nearly nine months.
Credit unions had been hoping and expecting to see a nomination to the NCUA Board, not a departure from it—though it's important to note McWatters still faces Senate confirmation and won't be departing NCUA immediately.
Even before the announcement about McWatters, Bacino said he was expecting an otherwise low-key year, noting, "All the controversial votes were taken in 2015."
Introduced in June, the revised member business lending regulation would eliminate a raft of restrictions on commercial loans including requirements that borrowers personally guarantee loans, as well as a provision that imposes an 80 percent loan-to-value cap on collateral used to secure a credit. The proposal would also abolish conditions limiting both construction and development lending and loans to one borrower to 15 percent of a credit union's net worth.
In November, NCUA proposed overhauling the field of membership rules that apply to approximately 3,900 federal credit unions. Among other things, the draft plan, which prompted loud criticism from banks, would allow credit unions to fashion fields of membership with up to 2.5 million people from any core-based statistical area in the country. NCUA, moreover, left open the possibility it might raise the population threshold in a final version of the regulation.
