CUs Should Prepare Now For Big Battle Between Regulatory Agencies
SAN ANTONIO-One analyst believes the Fed's proposal on credit protection in Truth in Lending disclosures is an example of the government overstepping its boundaries.
Mark Hein, CEO of SWBC's credit union division, said, "This is another example of the federal government attempting to regulate in areas where they have no expertise. The individual states have been regulating most of these products forever and understand the needs of their particular constituencies. These needs do change from state to state and the federal regulators do not understand this."
Hein warned that the proposed new disclosures mark the beginning of an "expected battle" between the Consumer Protection Agency and the individual state insurance departments. "This will be a very important battle to determine what the ultimate impact of this new agency will have on all of our lives, good or bad.
Count Hein as another who believes the credit protection disclosure language, if approved, will hurt CU income. "When the proposed disclosure language is designed to steer a consumer's view of a product, then it moves from a pure disclosure to the government trying to make decisions for us. Similarly, the Fed made the revisions to overdraft and interchange fees without understanding the impact. What they did was pass the burden of cost of these programs from the people who use them to the entire membership."
Any reductions in fees and non-interest income are going to hit all members, reminded Hein. "Credit Unions are not in a position of simply absorbing this. They will need to offset the revenue loss by increasing fees in other areas or cutting back services in order to make ends meet in a time when every financial institution can least afford it."
Hein said SWBC has been working "feverishly" with its partners and through political channels to make them aware of the disclosures' impact on credit unions and members