Credit unions are the good guys. We know our members by name. We know the ins and outs of their financial situations. And best of all, we have the trust of the 103 million people throughout the U.S. who are credit union members today.
Given credit unions' upstanding and dedicated service to these 103 million member-owners, it is troubling to see the industry burdened by more and more rules, regulations and policies that, frankly, shouldn't apply to credit unions in the first place.
I'm talking about the endless mortgage rules – from the requirements surrounding qualified mortgages to the new data collection requirements under the Home Mortgage Disclosure Act (HMDA) and everything in between.
The industry is also awaiting a final rule on prepaid products and is still wading through a proposal on payday lending, which could impact credit unions' ability to provide members a safe way to obtain short-term, small-dollar loans.
All these current and pending rules are why NAFCU, for the past several months, has been locked in a fight with the Consumer Financial Protection Bureau (CFPB) over how it could more effectively use its exemption authority under Section 1022(b)(3)(A) of the Dodd-Frank Act to exempt credit unions from the bureau's rulemakings.
NAFCU and its member credit unions support the CFPB's goal of protecting consumers. However, credit unions did not participate in the activities that led to the 2008 financial crisis that the Dodd-Frank Act and CFPB were created to address.
NAFCU was the only credit union trade association to oppose the bureau's rulemaking authority over the credit union industry, and our position has not changed. While the bureau only has direct authority over financial institutions with more than $10 billion in assets, its proposals, rules and enforcement actions eventually make their way into the processes of financial institutions of all sizes.
Significant Relief in One Fell Swoop
If the bureau were to exempt credit unions from rulemakings intended for those financial institutions that participated in the troubling practices that hurt consumers, the industry would see significant, immediate regulatory relief, and credit unions would have more of the flexibility they need to serve their members.
NAFCU's efforts in seeking this exemption have struck a chord among lawmakers: This March, a bipartisan group of 329 members of the U.S. House of Representatives joined in sending a letter to CFPB Director Richard Cordray urging him to use the bureau's statutory authority to exempt credit unions from certain rulemakings.
In their letter, initiated by Reps. Adam Schiff, D-Calif., and Steve Stivers, R-Ohio, the lawmakers praised credit unions and community banks for their focus on local lending and community development. Noting that the Dodd-Frank Act allows the bureau to exempt "any class" of entity from its rulemakings, the signers urged Cordray to use that authority to provide regulatory relief to credit unions and community banks. Unfortunately, these requests continue to be met with opposition.
Cordray delivered the bureau's semiannual report this March and April during hearings before the House Financial Services Committee and Senate Banking Committee.
During both hearings, lawmakers questioned him about matters important to credit unions, including the bureau's exemption authority. In response, Cordray said he has tailored rules for small credit unions and community banks, especially regarding mortgage rules. He also questioned the notion that CFPB can offer credit unions a blanket exemption from rules and said he wants to avoid overstepping the authority Congress provided.
In fact, during an exchange with House Financial Services Committee member Rep. Ed Royce, R-Calif., Cordray asserted that Congress had already spoken on this issue by omitting an explicit exemption.
NAFCU believes that Congress did not grant the larger exemption because Section 1022 allowed the bureau to exempt credit unions from certain rules as needed. The association holds that the Dodd-Frank Act gives CFPB broad authority to grant exemptions on a rule-by-rule basis to "any class of covered persons, service providers, or consumer financial products or services."
Clearly, such an exemption is, by statute, available to the nation's credit unions if the CFPB will only apply it. Therefore, NAFCU will continue its fight for credit union relief from CFPB's ongoing rulemakings.
No one – especially not a government bureau – knows the individual financial needs of members better than the credit unions that serve them. NAFCU will continue this fight so credit unions can continue to operate in the solid, honorable manner they always have for their 103 million, and counting, members.
Ed Templeton is chair of the NAFCU Board and president and CEO of SRP Federal Credit Union.
