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Compliance dollars better spent on members CUNA testifies
WASHINGTON (7/25/12)--At a House subcommittee hearing investigating whether the actions of the Consumer Financial Protection Bureau (CFPB) are, in effect, restricting consumer access to credit,
CUNA witness Doug Fecher is greeted by House subcommittee chairman Patrick McHenry (R-N.C.) before testifying on the problems credit unions face under increasinig regulatory burden. (CUNA photo)
credit union witness Doug Fecher warned that every dollar a credit union must spend complying with regulatory changes is a dollar it cannot spend to benefit its members.

Fecher is president/CEO of Wright-Patt CU, of Fairborn, Ohio, and represented the Credit Union National Association (CUNA) at the House Oversight and Government Reform Committee financial services subcommittee hearing Tuesday.

Fecher noted in his testimony that the 2010 Dodd-Frank Wall Street Reform Act charged the CFPB with reviewing all statutes and regulations that were placed by that law under the CFPB's jurisdiction, which Fecher said could result in hundreds of additional rule changes that credit unions could be required to address.

"This is why credit unions have a significant amount of anxiety with respect to the potential impact the bureau will have on their ability to serve and lend to their members," the CUNA witness told the House panel of lawmakers.

With due respect to the CFPB, Fecher added at one point, the regulator just "doesn't get it" regarding the burden and cost borne by credit unions due to increasing regulations.

He also noted that there is a significant amount of frustration within the credit union system with respect to further rules from the CFPB in response to the financial crisis because credit unions did not cause the financial crisis.

"(Credit unions) did not seek or receive any taxpayer bailout, and they did not engage in the type of activity that prompted the creation" of a bureau to protect consumers from abusive practices in the financial services arena, said the CUNA witness in his testimony.

Noting the CFPB's statutory authority to extend relief to credit unions and others from certain compliance responsibilities, Fecher said CUNA believes the bureau has more exemption authority than it has yet exercised.

"We are very concerned that the bureau seems to be picking and choosing when to use the statutory flexibility…The bureau's failure to use this authority as Congress intended may ultimately drive good actors out of markets, forcing consumers to do business with those entities that remain."

Fecher asked lawmakers to "aggressively urge" the CFPB to use its exemption clause so the weight of compounding rules "that are intended for abusers and the largest financial institutions" does not overburden credit unions and other smaller financial institutions.

Members of the subcommittee, including its chairman, Rep. Patrick McHenry (R-N.C.), repeatedly voiced concern during the hearing regarding the ability of credit unions and community banks to shoulder the ongoing and growing regulatory burden.

For example, Rep. Frank Guinta (R-N.H.), in an unusual move, drew attention to the plight of small financial institutions by quoting directly from CUNA testimony even before Fecher delivered his
The ranking member of the House Oversight subcommittee on financial services, Rep. Mike Quigley (D-Ill.), second from right, welcomes CUNA witness Doug Fecher while another witness--CFPB Director Richard Cordray, second from left,--looks on. (CUNA photo)

CFPB Director Richard Cordray was the first witness at the hearing and he testified and answered lawmakers' questions for slightly more than two hours. Cordray noted a number times that credit unions and other smaller financial institutions merit a different regulatory approach than do big institutions.

Cordray said credit unions' knowledge of their members, or what he called a "high-touch" approach to credit allotments, distinguishes them and other small lenders from "volume-driven" lenders whose credit decisions are based more fully on straight statistics. The "high-touch" business approach may mean credit unions and other smaller institutions do not have to be subject to the same rules as "volume-driven" lenders, Cordray acknowledged.

Cordray noted a number of times that the bureau strives to work with small institution stakeholders and announced in response to a question that a CFPB credit union and community bank working group should be operative within a month.

Also testifying at the CFPB hearing were:  Mark A. Calabria, director of Financial Regulation Studies at the Cato Institute;  Steven I. Zeisel, executive vice president and general counsel of the Consumer Bankers Association; and,  Michael D. Calhoun, president of the Center for Responsible Lending.

CUNA's testimony also addressed regulatory issues such as the CFPB current efforts to integrate redundant mortgage disclosure requirements into a simpler disclosure form for consumers, remittance rules and a pending definition revisions for "Qualified Mortgages" that will determine proper underwriting standards for borrowers.

Use the resource link to read CUNA's complete written testimony.
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