Industry Holds Its Breath As CFPB Takes Shape

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BIRMINGHAM, Ala.-Credit unions are becoming increasingly concerned about the fledgling Bureau of Consumer Financial Protection as the federal government prepares to get the new agency up and running.

"It is an area of great concern to credit unions; we are getting a lot of calls as credit unions begin to prepare for what they rightly feel are going to be some costly regulations down the line," said Dollar Associates' principal and former NCUA Chairman Dennis Dollar.

Minneapolis-based Wolters Kluwer Financial Services reported it was deluged with responses for a free webinar session to discuss how the new bureau would impact consumer compliance. Executive VP Ed Kramer noted that 24 hours after sending out an e-mail announcing the webcast he received 520 registrations, including 49 credit unions.

"I think that we have a long road and a bit of a challenge ahead of us," Sarah Loats, Regulatory Compliance Counsel at NAFCU added. "It was always NAFCU's position that this new bureau could be a major burden from a compliance standpoint

In addition to its powers to enforce fair lending requirements and anti-predatory lending rules, the bureau will also have an enormous capacity to gather data. Dollar noted that statutes require the bureau to base new regulations on hard data, but will not have to factor in the impact those rules will have on financial institutions.

"The data gathering over the next 12 to 18 months is a real area of concern," he continued. "The data collection process is going to be applicable to every financial institution in the country and it is going to be extremely burdensome."

While some credit unions experienced a "temporary euphoria" when changes were made to exclude all but the biggest three CUs from Bureau examinations, that high has been short-lived, Dollar explained, as regulators jockeying for position will likely add to the burden.

"All of the regulators have recognized that there is this bureau out there... that might affect their institutions, so everyone is ratcheting up their enforcement so there is no accusation that they're not doing an adequate job," added Kramer.

Though it does not have the authority to examine credit unions below $10-billion in assets, the bureau does retain the ability to step in when it believes NCUA or any other regulator is not properly addressing consumer protection issues. It will also have the ability to follow up on consumer complaints reported directly to it and/or pass those complaints off to other regulators.

"Treasury is aiming for an integrated system that will enable consumer complaints to be redirected seamlessly to the appropriate agency. As currently envisioned, [the] CFPB would not intend to act on consumer complaints that are not within its purview," said NCUA Spokesperson John McKechnie.

Speculation over who will lead the new bureau is also causing concern; consumer advocate and chair of the Congressional Oversight Panel overseeing the implementation of TARP Elizabeth Warren is considered the likely candidate.

"I know her and she is a consumer activist with a very clear agenda that does not take into consideration either availability of credit or impact on financial institutions by her regulations. She is a very disconcerting choice, in my opinion," Dollar said.

The former NCUA board chairman is also fearful that the new bureau will erode NCUA's authority and slowly whittle away its independence.

"I hope we don't look back on this legislation as the beginning of the end for specialized regulators like NCUA, OCC and state regulators. I'll gladly admit I'm wrong if this does not create a super-regulator that swallows other federal and state regulators over the next ten years, but I have real concerns at this early stage as to where this new law could lead," he said.

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