By Ryan Donovan
It’s no secret that credit unions are among the most regulated U.S. businesses.
Credit unions accept that reasonable regulations are necessary, but in recent years their operation and relationship with their members have been disrupted by a wave of new regulatory requirements implemented in response to a financial crisis they neither created nor contributed to. What is particularly frustrating for credit unions is that prior to, during and after the crisis, credit unions were a beacon of safety in a sea of predators. Now, credit unions face a crisis of regulatory burden that makes it more difficult to serve members and is the leading driver of system consolidation.
While this wave is coming from several agencies, it’s fair to say the brunt of credit unions’ angst today is a result of recent and pending rules from the Consumer Financial Protection Bureau (CFPB). To be clear: we believe consumers deserve strong protections from predatory service providers – it is one of the reasons why CUNA was a founding organization of the Consumer Federation of America. Nevertheless, we believe the rules should not make it more difficult for consumers to access safe and affordable financial services products.
Today, rules that ought to target bad actors are sweeping in credit unions, creating an operating environment that forces credit unions to choose from a menu of anti-consumer choices. They can stop offering the products subject to new regulation; reduce offering the products; offer the products but increase the cost to consumers; or merge with another institution that has the scale to manage the increased regulatory burden. When a credit union is forced by regulation to choose among these options, the regulatory requirement is not consumer protection. It is quite the opposite.
Best Time To Pound the Pavement
That’s why the 2016 CUNA GAC – the largest credit union gathering year after year – is one the best times to have advocates pounding the pavement on behalf of credit unions to make their voice heard on Capitol Hill. It gives us the opportunity to ask Congress to support several measures:
Mortgage lending has been the focus of new regulatory requirements in the wake of the financial crisis. Credit unions, which have always engaged in responsible lending practices, are overwhelmed with the unprecedented amount of regulations that are now required for mortgage lending (HMDA, TILA/RESPA, appraisal rules, loan officer compensation rules, servicing rules, qualified mortgage/ability-to-repay rules, etc.).
There are several pieces of legislation that can ease the burden, including:
- Community Institution Mortgage Relief Act (H.R. 1529) would exempt mortgages made by institutions under $10 billion in assets and held in portfolio for three years from RESPA’s escrow requirements and exempt mortgage servicers that service fewer than 20,000 mortgages annually from the requirements of Section 6 of RESPA.
- Mortgage Servicing Asset Capital Requirements Act (H.R. 1408 / S. 1910) would direct the Federal banking agencies to conduct a study of appropriate capital requirements for mortgage servicing assets for non‐systemic banking institutions.
- Portfolio Lending and Mortgage Access Act (H.R. 1210) would deem residential mortgages held in portfolio by the original creditor as a “qualified mortgage.”
- Mortgage Choice Act (H.R. 685) would improve the definitions of points and fees in connection with a mortgage transaction.
While mortgage lending is undoubtedly the focus of our CFPB regulatory relief asks, we think it is also time for Congress to take a look at how the consumer bureau is structured. Decisions that affect the livelihood of our so many Americans should not be made by one individual at the bureau. The Financial Product Safety Commission Act (H.R. 1266) is a commonsense bill that would restructure the CFPB into an independent financial product safety commission, as it was first proposed by the administration. Instead of being governed by a director, the bureau would be run by a five-person bipartisan commission to ensure certainty, fairness, and a stable form of leadership.
With nearly 5,000 people descending upon Washington this week for CUNA GAC, we have the chance to tell lawmakers our story. Explain to policymakers how new regulatory proposals will hinder growth and service to our members. We should be telling the credit union difference and why it’s important all year round, but this week presents a special opportunity – don’t miss your chance to advocate on behalf of the credit union movement.
Ryan Donovan is Chief Advocacy Officer with CUNA in Washington, D.C.