By Frank J. Diekmann
By now, you’ve been spending quite some time in solitary if you haven’t heard all the comparisons between making laws and making sausage. But even after years of taking the sausage factory tour, credit unions might want to shield their eyes with portions of the Financial CHOICE Act. Or perhaps they won’t, as we really aren’t sure what’s going to come out the other end.
Any piece of legislation as big as the 600-page Financial CHOICE Act leaves supporters often feeling they have no choice, forced to swallow some provisions to get the ones they want. Certainly, no group knows that better than credit unions. It was 20 years ago that the CU community got the last piece of legislation it really wanted (and needed): The Credit Union Membership Access Act, better known as HR 1151, which forced CUs to eat a cap on member business loans in order to get changes made on field of membership in the Federal Credit Union Act.
In 1998, the general feeling was credit unions could come back a year or two later and get the cap issue addressed. Two decades later, that isn’t even being discussed, as apparently that 600-page bill didn’t have room for page 601.
The Financial CHOICE Act, which just passed out of the House Financial Services Committee and is now headed for the House floor, guts much of Dodd-Frank. That encyclopedia-sized bill has been onerous to many, especially smaller credit unions, and has been blamed for everything from the demise of thousands of those same small CUs (and banks) to morning breath. All those big Wall Street banks Dodd-Frank was supposed to crack down on for their shenanigans? They’ve been doing just great, thanks, as the shenanigans business seems not just consistently profitable, but recession-proof.
First Shot is Fired
Dodd-Frank has been in the cross-hairs of the CU and bank trade associations almost since its passage in the wake of the financial crisis and Great Recession. Now the first shot has been fired.
But who will end up taking a bullet? The CU trade groups have been selling its benefits as regulatory relief. But they have also admitted they have “concerns” with certain provisions. There is oversight of NCUA’s budget, for instance. Congress does a dandy job with the U.S. budget, so it can only improve NCUA’s, right? It will also put a five-person board in charge of the CFPB, rather than a single director, because, again, in Washington, agencies led by boards have always been just crackerjack at oversight.
There’s another provision in the bill that may not affect credit unions directly, but it appeals directly to the reason credit unions were created in the first place and to the moral code that is supposed to guide them.
Although I haven’t heard anyone in the trade groups talking about it, the bill strips the CFPB of many powers, including the ability to write major rules regulating consumer financial companies without getting approval from Congress, and it would halt the CFPB from levying hefty fines against unscrupulous financial institutions for “unfair” or “deceptive” practices. In addition, it removes the authority of the CFPB to regulate “small-dollar credit,” the pretty wrapping paper of words that disguises the ugly payday lenders and vehicle title lenders that are in the box.
Those companies have a long and infamous history of screwing the underserved, and if this bill passes as is they will be back sticking it to a lot of people who are already stuck faster than you can say 400% APR.
Holding Their Noses
I know the CU reps on the Hill don’t want to do anything to upset the Financial CHOICE Act’s prospects for passage, but those provisions require a lot more than just holding their noses.
While most Americans continue to believe Wall Street needs to be held accountable, Sen. Sherrod Brown (D-OH), the ranking Democrat on the Senate Banking Committee, said, “The special interests and their lobbyists, who are hell-bent on rewriting the rules in Wall Street’s favor, couldn’t have drafted a better bill themselves, if indeed they didn’t.”
Perhaps Brown’s right, or perhaps he’s wrong. We’ll see what eventually comes out of the House if it passes and, especially, the Senate, where some forecasters have said the odds are against it. (But that will just enable congressmen to come back to the financial trade groups and explain how they just need this one more donation.)
So, depending on how strong your stomach is, it’s your choice if you want to keep a careful eye on CHOICE. It’s the same reason so many avoid reading the ingredients on a package of hot dogs; yes, you’re more informed if you do, but…
Frank J. Diekmann is Cooperator in Chief at CUToday.info and can be reached at Frank@CUToday.info.