WASHINGTON — The NCUA's risk-based capital rule, along with new regulations coming out of the Consumer Financial Protection Bureau, may threaten credit union growth and even the future of some institutions, say a number of CU executives attending CUNA's Governmental Affairs Conference here.
CU leaders told Credit Union Journal that they are very concerned with the NCUA's new capital proposal giving examiners the ability to arbitrarily set higher capital standards. They say this can make a credit union's future uncertain — especially with a CU's limited means to raise additional capital in the wake of an examiner calling for more reserves.
Meanwhile, the CFPB's track record of guidance adding to the compliance burden along with the agency's authority to create new rules for financial institutions, is making CU executives uneasy about their ability to serve members at their current levels.
"The Consumer Financial Protection Bureau and the risk-based capital rule will have detrimental effects on the credit union movement over time," said Scott Wilson, CEO of $464 million SeaComm FCU in Massena, N.Y., who does not like examiners setting capital requirements.
Stan Barnes, CEO of the $192 million CSE FCU in Canton, Ohio, opposes giving examiners that authority because he says examiners have varying skill levels — some with an excellent understanding of the CU's business and proper risk weighting, and some with only a basic knowledge. "Some see the big picture and others don't, and that worries me."
Barnes said giving examiners the ability to increase capital requirements and not having a "meaningful" appeal process with NCUA is "a huge issue for us."
Steven Van Beek, attorney at Howard & Howard, Royal Oak, Mich., which works with CUs on mergers, said he has been hearing the same concerns from a number of CU leaders, and believes many will be talking about the matter when they speak to legislators during GAC week.
"NCUA created the capital rule in a bubble, without input from credit unions or a trade group. Now the rule's been revealed and some credit unions could be behind the eight-ball. Credit unions really need to provide their comments to NCUA and speak up in the agency's Listening Sessions. They have to say that parts of this this rule are inadequate."
Van Beek expects GAC attendees will also talk to Congress about the CFPB. Several CU leaders say they will speak to elected officials about the CFPB's unlimited authority and how the rules the agency hands down often negatively affect credit unions, which ultimately hurts member owners.
"There is a lack of coordination between what the CFPB and NCUA are doing. They both have their own agendas," offered Van Beek, who said that lack of coordination is raining down too many rules.
"The CFPB is a huge concern and not our friend," said Barnes. "They say they are on the same page with credit unions — that we both want the best for consumers. Well, if they do, they seem to have a different way of going about it than we do. We have to be very concerned about their future actions."
David Meyer, board chair at the $137 million Midwest Community FCU in Defiance, Ohio, sees the CFPB quickly accounting for a growing share of credit unions' compliance burden. "And worst of all, we have no control, no control of any kind, on what is being handed down by this agency."
Robert Werner, CEO of the $572 million Sb1 FCU in Philadelphia, agrees. "We know that the CFPB is looking at many, many areas that impact financial institutions. And, there are about seven more years of these (CFPB) regulations to come. So I wonder what's next?"
Bill Vogeney, EVP/CLO at the $3.8 billion-asset Ent FCU in Colorado Springs, Colo., believes if CUs are not careful that in the near future they may run into fair lending violations, in the eyes of the CFPB, over the ability to repay rule within the new qualified mortgage rule.
"If CUs make exceptions to this rule, they need to be wary of the makeup of the borrowers they make exceptions for," said Vogeney. "Credit unions will need to pay close attention to the mix of high-income to low-income borrowers, and ethnic backgrounds. The CFPB will be watching."
Werner said the potential large regulatory burden coming down from the CFPB is a topic he will discuss with Congress this week. "Things might look fine from Capitol Hill. But some of the rules the CFPB is putting in place are hurting Main Street."
And hurting members, emphasized Craig Tabor, CEO of the $147 million BluCurrent CU in Springfield, Mo. "I am more concerned with the CFPB's impact on the membership than the CU. Every time they change something it affects consumers either through higher prices or larger fees."
