MADISON, Wis.-Consumer protection regulation likely to be passed by Congress will not have a major impact on credit unions if such policies implemented in other countries are good guides.
In a new report from Filene Research Group, author Ben Rogers points out that policies in Ireland, Australia and Canada have been relatively soft on credit union, which have not incurred great costs as a result of those policies. The presence of such an agency has actually given credit unions a bit of a tactical advantage in those countries, as they are able to use government statistics to back up their claims of superior member service, he suggested.
"This consumer financial agency or bureau will be important but most credit unions shouldn't feel it very hard. With any new regulation there are costs but I think it will be surprisingly light," Rogers told Credit Union Journal. "I think it will be a net gain for credit unions in one sense, in that banks and other competitors are going to have significantly higher costs for compliance. It's going to take more energy for the lumbering guy to get over the hurdle. The skinny guy (credit unions) will still have to jump the hurdle, but it will be less effort for him."
Congress is currently debating a bill that would establish a consumer protection office run by the Federal Reserve. The new office would have examination authority over financial institutions with more than $10 billion in assets to ensure compliance with consumer regulations. All credit unions save for the largest three would be exempt from the office's examination authority, however it would still have the ability to investigate complaints against CUs.
Though the final product is still up in the air, Rogers believes that the new office will work very much like the Canadian system. Like the proposed Consumer Financial Protection Agency here in the U.S., the Financial Consumer Agency of Canada has the ability to examine individual institutions, but it chiefly relies on consumer complaints to direct its efforts. The agency rarely deals with small credit unions as they already have strong relationships and consumer protections in place and face-to-face exams are used as a last resort, former FCAC commissioner William Knight noted in the Filene report.
While credit unions of all sizes will likely incur some costs and spend a little more staff time to deal with compliance issues under the proposed law, Rogers explained, even larger institutions in Canada and other English-speaking countries with a consumer protection agency were not forced to hire a slew of new staff members because of the new laws.
"As long as your members are happy and most credit union members demonstrably are, it's not going to be a compliance calamity," he added.
