WASHINGTON – A financial services reform bill introduced in the Senate yesterday would tilt the continuing battle between state and federal regulators back to the states on the enforcement of consumer laws.
The bill represents a major tilt in the preemption battles in which federal regulators, including NCUA, and federal courts have continuously ruled in recent years that federally chartered institutions are not bound by state laws on subprime mortgages, credit cards and other consumer matters.
NAFCU yesterday said it is drafting language it hopes to convince the Senate to add to the bill that would allow NCUA to preempt state laws if it felt that a state law "prevents or significantly interferes" with the ability of a federally chartered credit union to operate.
The bill, introduced yesterday by Sen. Christopher Dodd, the chairman of the Senate Banking Committee, would create a consumer financial protection bureau but instead of an independent agency, it would be inside the Federal Reserve. The bureau ostensibly would be independent of the Fed but be funded by the Fed’s budget. It would write all consumer regulations, just as the Fed does now, but the current regulators would have examination powers over all institutions under $10 billion. That means three credit unions, Navy FCU, Pentagon FCU and North Carolina SECU, would be examined for compliance with consumer laws by the consumer agency.
NAFCU and CUNA said yesterday they will continue to urge the Senate to raise the asset size so that all credit unions are examined for consumer compliance by either NCUA or the state credit union regulator. "We’ve always felt that all credit unions should be treated the same and that the industry shouldn’t be divided on the basis of asset size," \Dan Berger, chief lobbyist for NAFCU, told The Credit Union Journal yesterday.
The consumer bureau proposal falls short of the proposal endorsed by the Obama administration and passed by the House which would create a new agency separate from existing regulators.
NCUA, expecting efforts to bring credit unions under the new agency, budgeted $1.5 million to create its own office of consumer affairs beginning this year that will do many of the same things the new bureau will do, including investigate consumer complaints and sponsor financial education programs for consumers.
In a prepared statement, CUNA President Dan Mica said CUNA will also continue to lobby for the exemption of the three credit union giants from being examined by the consumer bureau. "We will continue to advocate the view that the credit union current regulatory regime is working for all credit unions and can continue to do so," he stated.
