The Consumer Financial Protection Bureau (CFPB) will usher in a new era in regulation for credit unions. Fortunately, credit unions' core principles provide a solid foundation for addressing some of the CFPB's primary goals. The agency's objective, to ensure that consumers are protected from unfair and deceptive practices, mirrors credit unions' historic mission of member service. In addition, the CFPB's goal to promote access to financial services for all consumers underscores credit unions' mandate to promote thrift.
While it will only have direct examination authority for credit unions above $10 billion, the CFPB's regulations will apply to all credit unions regardless of size. At the same time, The National Credit Union Administration (NCUA) will continue its primary examination authority for credit unions under $10 billion.
The CFPB will have plenty of latitude to pursue its consumer protection mandate vigorously. In that regard, we should all increase our awareness and understanding of how the bureau will impact us. We should also remain mindful that each regulator typically employs its own approach in reviewing and interpreting comments from affected parties. We can't expect the CFPB to act in a way similar to the Federal Reserve or the NCUA.
It would not be that far of a leap to assume that consumer groups will be quite active in the CFPB rulemaking process. Given the CFPB's broad authority, credit unions will have to be all the more vigilant in reviewing the bureau's proposed and final regulations.
In addition, credit unions need to be more rigorous in their product descriptions to avoid seeing their products categorized with those from other institutions. The CFPB will have far-reaching authority to address any type of financial product and require changes to a credit union's daily operations. To avoid excessive burdens from new regulations, credit unions should not refrain from participating in the comment process. Credit unions should also exercise their right to request clarifications from the bureau on any requirements that may be difficult to discern.
The irony, of course, is that the CFPB has stated that part of its mission is to streamline regulations and policy so that providers of financial products and services can abide by the rules without requiring an "army of lawyers." Yet, while the CFPB has been in development, the Federal Reserve has issued rules addressing the Credit CARD Act, escrow accounts and remittance transfers. The responsibility for finalizing those rules will rest, however, with the CFPB. So the challenge is how the CFPB will meet its goal of streamlining while finalizing thousands of pages of new regulations.
Another major aspect of the CFPB will be the consumer complaint process. Due to the increased focus on consumer protection, this may result in an uptick in member complaints. Credit unions may want to revisit and update their existing procedures to address member complaints. NCUA's recently established Office of Consumer Protection (OCP) will handle member complaints, and the CFPB has indicated that it will direct complaints about credit unions with less than $10 billion in assets to the OCP.
There may be some solace in knowing that the CFPB's actions are not completely unfettered. The Financial Stability Oversight Council, comprised of 10 voting members from the regulatory agencies, including NCUA, and chaired by the Treasury secretary, may seek to void a CFPB rule, by two-thirds vote, after requesting that the agency alter it. While the case is being resolved, the Treasury secretary can stay the disputed rule for up to 90 days. However, the threshold for the council is high since it must conclude that a given rule would put the safety and soundness or the stability of the financial system at risk.
While the CFPB is the big unknown on the landscape, there are still other regulations that will come into effect, including the SAFE Act and the interchange rule. Without question, compliance challenges abound this year and next, and we will all have to step up our efforts to meet them. For its part, NAFCU will remain diligent in providing credit unions the tools and insight necessary to overcome these hurdles and meet other challenges. Since expectations will be high for the agency to show results, it behooves us not to underestimate its capabilities. Therefore, we should be that much more meticulous in our compliance efforts.
As the saying goes, tough situations don't last but tough people do. Thanks to the tools that NAFCU provides on a daily basis, my own credit union, Webster First, has successfully managed a myriad of regulatory and compliance challenges over the years. And I am confident that all of us will continue to shine even under the glare of this intense new light.
Michael Lussier is NAFCU Chair and President/CEO of Webster First FCU in Worcester, Mass.
