CHARLESTON, W. Va. (8/21/12)--Increased regulatory burdens and "the multitude of complex regulations" that credit unions must now address has been one of the "most significant changes" in his 27 years in the movement, Tom Brewer, president/CEO of People's FCU, Nitro, W. Va., told federal lawmakers Monday.
Brewer spoke during a House Financial Services financial institutions and consumer credit subcommittee field hearing in Charleston, W. Va..
Subcommittee leader Rep. Shelley Moore Capito (R-W. Va.) led the hearing, which focused on how financial regulations impact job growth.
Sen. Joe Manchin (D-W. Va.) also joined the subcommittee members in the discussion. Manchin and the subcommittee members acknowledged that credit unions and small institutions did not cause the financial crisis, but now have to live with increased regulations as a result.
The credit union CEO in a prepared statement said regulatory compliance is a top priority, and an expense, for his $95-million-in-asset, 11,000-member credit union.
Budgets are tight for credit unions, especially one with as small of a staff as his, and every dollar spent on compliance represents a dollar that could be spent on direct member service, he added.
"Most of the costs of compliance do not vary by [the size of an institution] and, therefore, are proportionately a much greater burden for smaller institutions," Brewer said. Around half of credit unions in West Virginia hold less than $10 million in assets, and regulatory burden is also a top issue for these credit unions. "Difficulties in maintaining high levels of member service in the face of increasing regulations is a key reason that some credit unions have merged into larger credit unions in recent years," he added.
Many members have noticed how regulatory issues can impact their own daily business at their credit unions, Brewer said. He noted that some repetitive regulations have confused consumers, and that members feel the disclosures they are provided for loans and deposit accounts are excessive.
The National Credit Union Administration, Federal Reserve Board and state regulatory agencies have steadily increased the number of regulations imposed on credit unions, and the regulatory burden could increase with the recent creation of the Consumer Financial Protection Bureau (CFPB), Brewer noted.
While evaluating risk management is a key part of regulatory examinations, and the examination process "works reasonably well," Brewer said there is inconsistency in how risk is evaluated in some cases.
He said approval of the Examination Fairness and Reform Act (H.R. 3461) would improve the exam process for financial institutions. That bill would make information gathered by financial regulatory examiners available to financial institutions, codify certain examination policy guidance, and establish an exam appeals process that would allow financial institutions to air grievances before an independent administrative law judge. Similar legislation has been introduced in the Senate (S. 2160), and both bills have been referred to their respective financial institution committees.
Overall, Brewer said, "there is nothing about the current climate of over-regulation that could be considered positive for economic growth in West Virginia." However, he noted one action that Congress could take to improve the economy in his state and nationwide: approving legislation that would increase the current 12.25%-of-assets credit union member business lending cap.
Increasing the MBL cap to 27.5% of assets, as proposed in separate House and Senate bills, would inject $13 billion in new capital into the economy and create an estimated 140,000 new jobs, at no cost to taxpayers. Brewer said increasing the MBL cap would mean $31 million in new credit union business loans, and 335 new jobs, for West Virginians.
City National Bank President Charles Hageboeck, Pendleton Community Bank President William Loving, Mountaineer Mobile Homes Owner John Wohlever, and Mountain State Justice Inc. Attorney Sarah Brown were also scheduled to testify at the hearing.