WASHINGTON—A new study by the U.S. Government Accountability Office states that the Dodd-Frank Act has had a “moderate” impact on the ability of credit unions and community banks to provide credit.
CUNA and NAFCU, however, have termed the study preliminary, as the report does not include many regulatory changes—which are costly to CUs—that were not in effect at the time of the research.
The GAO said it has found suggestions of "moderate to minimal initial reductions in the availability of credit" among those responding to various surveys on the subject.
CUNA and NAFCU stated that they have warned of the serious costs to credit unions and consumers represented by the burden of rules that sprang from the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act.
The data omitted from the reports includes the recent Truth in Lending Act-Real Estate Settlement Procedures Act integrated disclosure (TRID) rule, which went into effect for closed-end residential mortgages only on Oct. 3. It also excludes any data on the new Home Mortgage Disclosure Act rule for which reporting does not commence until Jan. 1, 2018.
Both rules will have significant costs to credit unions, CUNA stated, which could threaten to decrease mortgage-credit availability to their members.
"This GAO report describes its early findings on the impact of Dodd-Frank regulatory burden on credit unions and community banks," noted CUNA Deputy Chief Advocacy Officer Elizabeth Eurgubian. "It is our hope that Congress will thoroughly investigate the costs of regulatory burden as the full picture unfolds and more regulatory requirements become effective."
The GAO report confirms that Dodd-Frank regulations have increased compliance burdens on credit unions, stated NAFCU.
“Unfortunately, the methodology of the study, and the GAO acknowledges this in its report, fails to capture the full impact of these crushing regulatory burdens,” said NAFCU President and CEO Dan Berger. “We believe the numbers speak volumes about the devastating impact of the Dodd-Frank regulations. Since the second quarter of 2010, the number of credit unions has decreased by more than 17% (more than 1,280 institutions). Specifically, 96% were smaller institutions with assets of less than $100 million.
“Given the fact that many Dodd-Frank regulations have yet to be implemented, we expect the cumulative burden will no doubt exacerbate the negative impact on the credit union industry,” continued Berger. “It has been widely recognized by Congress that credit unions did not participate in the risky behavior that led to the financial crisis that these regulations were intended to address. This is why we have and will continue to urge the Consumer Financial Protection Bureau and the National Credit Union Administration to use their authority to provide all possible regulatory relief to credit unions.”