In one of his first official acts since being named permanent National Credit Union Administration chairman, J. Mark McWatters called on Consumer Financial Protection Bureau Director Richard Cordray to implement a conditional exemption from CFPB examination and enforcement authority for credit unions with assets above $10 billion.
In a letter to Cordray, McWatters pointed to credit unions’ unique role within the financial services marketplace, given that they are not-for-profit cooperatives answering to member-owners, rather than for-profit banks. McWatters told Cordray that shifting compliance examination and enforcement authority to the NCUA would be an improvement over the current system, which, he said, places undue examination burden upon credit unions along with aggressive punitive fines.
“Subjecting federally insured credit unions and their consumer/member owners to the dual-examination — and, in the case of federally insured, state-chartered credit unions, triple-examination — regime mandated under Section 1025 of the Consumer Financial Protection Act imposes unnecessarily burdensome costs, particularly given their positive, consumer-focused role,” McWatters wrote.
Only six credit unions currently have assets of $10 billion or more and are subject to direct CFPB examination: Navy FCU, State Employees’ FCU, Pentagon FCU, Boeing Employees FCU, SchoolsFirst FCU and The Golden 1 CU.
The chairman’s letter marks his second high-profile call-out to Cordray in just over a month, following a May letter in which he urged the CFPB director to exempt credit unions from the bureau’s oversight. (McWatters previously served as acting chairman.)
By providing a carve-out for CUs, wrote McWatters, the CFPB could free up resources to better focus on larger investor-owned, for-profit institutions while also providing consumer protections for credit union members.
“I believe granting federally insured credit unions an exemption from [CFPB oversight] will help ensure they are treated fairly and equitably while also maintaining consumer protections and a level playing field for all parties involved,” he wrote.
Rather than taking an antagonistic position, however, McWatters pledged that the two organizations can work together to benefit consumers.
“As the prudential regulator of federally insured credit unions, the NCUA possesses a broader arsenal of enforcement tools than is available to the CFPB, allowing the agency to take more targeted actions to protect consumers and address consumer financial protection law violations.”
McWatters’ letter echoes many of the sentiments CU trade groups have expressed for years, and the National Association of Federally-Insured Credit Unions was quick to praise the chairman.
“NAFCU — from the bureau’s inception — was against the CFPB having direct oversight over credit unions and was the only financial trade association to take that stance,” NAFCU President and CEO Dan Berger said in a statement. “NAFCU and its members thank chairman McWatters for making this request directly to Director Cordray.”
State CU trade associations also praised the move.
"I applaud the Chairman's ask of the CFPB. As the prudential regulator, NCUA has the expertise, access, and structure to efficiently and effectively regulate credit unions for rules promulgated from CFPB and any other regulators that have authority over credit unions," said Cooperative Credit Union Association President Paul Gentile.