The downside of compromise

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Sometimes the surest way to log a “win” is to strike a compromise. We saw this play out with enactment of the Dodd-Frank Act and creation of the Consumer Financial Protection Bureau. NAFCU and its board vehemently opposed the bureau having any rulemaking authority over credit unions – other groups folded.

This was one compromise that hasn’t worked out well. The CFPB’s reach is ever expanding and CUs are forced to deal with the growing compliance burden.

Case in point: compliance deadlines for the amendments to the mortgage servicing rules, the new Home Mortgage Disclosure Act rules and the bureau’s final rule on prepaid accounts all converge this fall.

All these current and pending rules are why NAFCU has been locked in a fight with the CFPB over how it should not be regulating the credit union industry.

This is not to say that NAFCU and its members don’t support the CFPB’s goal of protecting consumers—we do. Consumers need protection from predatory lenders and other unscrupulous actors. However, CUs did not participate in the activities that led to the 2008 financial crisis that the bureau was created to address.

NAFCU was the only financial services trade association to oppose the bureau’s rulemaking authority over the CU industry, and our position has not changed.

For example, NAFCU strongly challenged the CFPB’s authority over credit unions in 2009 when Price Chopper Employees FCU President and CEO Dawn Donovan testified, “NAFCU … opposes extending this authority to credit unions.”

Over time, and in subsequent testimony, the association has held to these views. In 2015, then-SRP FCU President and CEO Ed Templeton said, “As expected, the breadth and pace of CFPB rulemaking is troublesome, and the unprecedented new compliance burden placed on credit unions has been immense. Many smaller institutions simply cannot keep up with the new regulatory tide and have had to merge out of business or be taken over.”

Our staunch opposition to credit unions being under the CFPB’s authority was not a particularly popular or easy position to take. The NAFCU Board of Directors and our lobbying team stood strong and did not bow under political pressure throughout these negotiations. NAFCU always serves in the best interests of the association’s members and the industry as a whole. That will not change.

NAFCU knows the credit union industry is in need of regulatory relief, and the easiest way to get that would be to pull credit unions out from under the regulatory authority of the CFPB—or, at the very least, limit the number of rules from the bureau that would apply to credit unions. To that end, NAFCU has also repeatedly urged the CFPB to use its exemption authority under Section 1022(b)(3)(A) of the Dodd-Frank Act to exempt credit unions from the bureau’s 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 – with no compromise—so credit unions can continue to operate in the upright manner they always have for their 106 million members.

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Compliance Dodd-Frank CFPB NAFCU