By Ray Birch
WASHINGTON—In response to a proposal by a member of the NCUA board, credit unions and their trade groups are saying another exam is not the answer to address credit union compliance with consumer laws—instead better support tools are needed.
That’s especially true for smaller credit unions that most acutely feel the compliance burden, they added.
That’s the reaction from credit union professionals in reaction to NCUA Board Member Todd Harper’s proposal to create a dedicated consumer compliance exam program for large, complex credit unions.
Harper is requesting public comment on the proposal that would affect large, complex CUs but exclude those over $10 billion in assets, since they are already subject to CFPB oversight.
NAFCU and CUNA both say more details are needed before any firm position can be taken.
“We have to see exactly how Board Member Harper plans to flesh out this program, but I can say in looking at his idea conceptually, our perspective is it looks like it's a solution in search of a problem,” said Elizabeth Eurgubian, CUNA deputy chief advocacy officer and senior counsel. “We have NCUA that can flag consumer protection issues and problems inside credit unions if they see them and can delve into these issues and investigate if needed and take action, regardless of the size of the credit union.”
An Opposite Approach
Eurgubian believes the agency should take the opposite approach, and look less at time-consuming and costly regulation in favor of providing credit unions with support tools to address compliance issues.
Elizabeth Eurgubian, CUNA
“If there were resources to be dedicated to consumer protection, and Board Member Harper felt the need for that, we would recommend the resources go towards compliance assistance and tools for smaller credit unions,” she said. “Take more of a proactive approach to compliance rather than a reactive approach, where we enhance examinations. The better approach for credit unions is to provide them with the resources to comply with all the various rules they have to comply with.”
NAFCU believes sufficient regulations to meet Harper’s objectives are already in place.
“NAFCU supports fostering a regulatory regime that is right-sized and promotes credit union growth, allowing credit unions to then focus on helping their members,” said Carrie Hunt, NAFCU executive vice president of government affairs and general counsel. “We believe that credit unions are already being appropriately examined by NCUA. We see no need to deploy valuable resources in this regard or create new exam burdens.”
The View From One Large CU
One large credit union that has had to deal with the CFPB’s consumer compliance oversight questions just how much this type of exam from NCUA is really necessary.
“Is it needed? I guess that is in the eye of the beholder,” said David Mooney, president and CEO of $12-billion Alliant CU in Chicago, noting his CU undergoes CFPB consumer compliance exams. “Consumer protection, and compliance with consumer protection laws is, of course, important. Board Member Harper clearly believes that greater oversight of large CU compliance is needed, suggesting credit unions may not always be acting in members’ best interests.”
But Mooney said it’s not clear to him why this concern applies only to large, complex credit unions, particularly given that the definition is somewhat arbitrary.
“Are small credit unions more virtuous? Are their members less deserving of protection? Do they have better compliance-management systems?” noted Mooney. “Board Member Harper has also said that NCUA’s consumer compliance processes aren’t, but should be, consistent with those of other financial regulators.”
Comes Down to the Details
But the impact on credit unions will depend on the details, noted Mooney.
“Would these compliance exams be part of regular safety and soundness examinations, or separate? Without question there would be more data and document gathering and more associated processes, systems and people,” he said. “For the over-$10-billion credit unions subject to CFPB examination, the incremental cost of establishing compliance management systems has been in the tens of millions of dollars. And that cost comes at the expense of member dividends and service investments.”
Mooney stressed that few would say preventing unfair or exploitive practices is not a worthwhile objective.
“The question is, where do we draw the cost-benefit line?” he said.
Carrie Hunt
Unlikely to Come to Vote
But that line may never be drawn, according to CUNA, given that Harper is the minority (Democrat) member of the three-person NCUA board.
“Could this pass an NCUA board vote, I guess it would depend on exactly what board member Harper's planning,” stated Eurgubian. “I haven't heard other board members express the concern here that Board Member Harper has. We have to wait and see when the details are fleshed out, and then see who would be supportive of it. Generally speaking we don't think this is something that's necessary for credit unions.”