WASHINGTON-House leaders are expected this week to back a bid to exempt all credit unions less than $10 billion in assets from examination by the new Consumer Financial Protection Agency, the latest bid to carve credit unions out of legislation aimed at plugging holes in the financial regulatory system.
As a result, all but three giants - Navy FCU, Pentagon FCU and North Carolina State Employees' CU - would be examined for compliance with consumer rules and laws by their "functional" regulator, that is, NCUA or state credit union supervisors.
But credit union lobbyists, who sought the same $10-billion exemption set for banks, were still pushing last week to exempt the three giants as well. "Though we appreciate the efforts toward parity, NAFCU has a longstanding policy against bifurcating and splitting the credit union industry with a low arbitrary number and continues to oppose having credit unions under CFPA, no matter who does the exams and enforcement of CFPA rules because we did not cause this crisis," said Dan Berger, chief lobbyist for NAFCU.
"CUNA and credit unions have supported the proposed CFPA's full authority to write the rules for consumer protection, but have advocated strongly that direct exam and supervision authority for these rules remain with their prudential regulators who largely understand the unique qualities of credit unions," said CUNA President Dan Mica, in a prepared statement.
The exemption was set during last month's vote by the House Financial Services Committee at $10 billion for banks and $1.5 billion for credit unions, which would mean that about 80 credit unions would be examined by the new consumer agency. But House leaders are expected to approve the broader exemption for credit unions when the full House votes on the bill to create the new agency this week.
During that vote, the consumer protection bill is expected to be combined with other financial regulatory reforms, including a measure setting new standards for financial derivatives, a bill creating new rules for Wall Street ratings agencies and legislation creating a new agency that would wind down large financial institutions that pose a risk to the overall financial system, such as a Fannie Mae, an AIG or a Lehman Brothers. That agency would be funded by fees assessed large institutions, which the credit union lobby helped exempt all institutions less than $75 billion-carving out every one of the nation's credit unions.
The carve-out from the examinations by the Consumer Financial Protection Agency will not exempt credit unions from its oversight as the agency will still have authority to write rules governing all financial products and services and the ultimate authority to enforce compliance for credit unions, banks, insurers and securities brokerages.
Creation of the consumer protection agency comes as NCUA is set to launch its own office of consumer protection early next year. NCUA Board member Michael Fryzel, who developed the plan last year, said he hoped the agency's own office would deter Congress from including credit unions in the new agency. The new office will take over duties currently performed by the little-used NCUA office of the ombudsman.
NCUA has budgeted $1.5 million for the new consumer office and plans to man it with seven employees. The office will provide consumer education and monitor for compliance with consumer regulations and serve as a liaison with the new consumer protection agency.
