WASHINGTON (5/10/12)--The burden of excessive financial regulations has resulted in more than $2 million in additional costs for his credit union, and, in some cases, reduced service to members, Terry West, president/CEO of Vystar CU, Jacksonville, Fla., said during a Wednesday House subcommittee on financial institutions and consumer credit hearing on the impact of regulations on small financial institutions.
West, testifying on behalf of his credit union and the Credit Union National Association (CUNA), said Vystar wants to do right as a credit union, but is often challenged by the ever-changing regulatory environment.
Vystar CU CEO Terry West, right, told House subcommittee chair Rep. Shelly Moore Capito (R-W. Va.), left, and other subcommittee members of the burdens that unneeded regulations have created for his credit union and its members. (CUNA Photo)
Credit unions have been "battered by the volume of regulatory changes" that have been made in recent years, he said. West estimated that credit unions have been subjected to in excess of 120 regulatory changes from at least 15 different federal agencies since 2008, and they are bracing for the next wave, which will occur once the Consumer Financial Protection Bureau (CFPB) hits its stride, he said.
"We have tried to estimate the cost and found it complicated because compliance reaches into so many areas," West said, adding that "after $2 million we stopped trying."
Regulatory compliance demands have resulted in the creation of new positions at Vystar, West said. In addition to its senior risk position, "we created a vendor management department, increased our Bank Secrecy Act staffing and are about to increase our number of information security officers. We have had to increase staff because of compliance and the costs keep on coming," he said.
While his credit union does all it can to avoid increasing costs for members, Vystar was recently forced to increase the price it charges for remittances to pay for the cost of compliance. Vystar also has been forced to hold some mortgage rates steady, rather than lowering them, due to the cost of compliance.
Members are sometimes troubled by the additional time that certain regulations add to the mortgage approval process. West said his credit union recently was forced to delay offering some new products to members to give his staff more time to deal with compliance issues.
He was joined by First United Bank & Trust CEO William Grant, SRP FCU CEO Ed Templeton, First State Bank Chief Investment Officer Samuel Vallandingham, and Georgetown University law professor Adam Levitin during the hearing.
When prompted by Rep. David Scott (D-Ga.), the witnesses said eliminating outdated ATM disclosure regulations and modifying pending qualified mortgage regulations would be a good start to meaningful regulatory relief.
West in his testimony urged the CFPB to consider using its statutory authority to exempt credit unions and other financial institutions from new regulations, and to establish appropriate transaction thresholds, as needed.
Rep. Carolyn Maloney (D-N.Y.) asked if greater regulatory scrutiny of nonbank lenders would help traditional institutions, and the witnesses agreed that it would. West said making nonbank lenders subject to new regulations would be beneficial, as that change would allow credit unions to reach out to potential new members before they go to nonbank lenders.
For prepared testimony from West and other witnesses, use the resource link.