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180 reg changes since '08 impose high costs for CUs, CUNA testifies
WASHINGTON (7/16/14)--The Credit Union National Association made its case on the costly effect of regulatory burden on credit unions before the House Financial Services subcommittee on financial institutions and consumer credit Tuesday. Doug Fecher, president/CEO of $2.8 billion-asset Wright-Patt CU, Beavercreek, Ohio, testified before the subcommittee on behalf of CUNA.

Click to view larger image Rep. Shelley Moore Capito (R-W. Va.), chair of the House Financial Services subcommittee on financial institutions and consumer credit, greets CUNA witness Doug Fecher before he testifies on the burden credit unions bear because of increasing regulatory complexity. (CUNA Photo)
The hearing was a look at nine different bills aimed at regulatory relief. Having last testified before the House Committee on Oversight and Government Reform on financial regulation and its effect on access to credit two years ago, Fecher underscored the message he delivered then.

"Credit unions face a crisis of creeping complexity with respect to regulatory burden. It's not just one new law or revised regulation that challenges credit unions, but the cumulative effect of all regulatory changes," he said. "The frequency with which new and revised regulations have been promulgated in recent years and the complexity of these requirements is staggering."

Since 2008, CUNA estimates that more than 180 regulatory changes from at least 15 different federal agencies have affected credit unions.  He said the costs to credit unions in terms of time and money diverts resources from member services.

CUNA commented on five bills and three legislative drafts that would have direct relief on credit unions' regulatory burdens. The Regulation D Study Act (H.R. 3240), which directs the Government Accountability Office to study the impact of the Federal Reserve Board's monetary reserve requirements, was strongly supported by  CUNA.

Regulation D limits the number of automatic withdrawals from a member's savings account to six transactions per month. This can cause consumers to overdraft if their checking account falls below $0 and the six transactions already have been made for the month.

CUNA supports an increase in the cap, or for it to be eliminated altogether. Responding to a question from Rep. Robert Pittenger (R-N.C.) about why the bill is needed, Fecher explained the difficulty that comes with telling a credit union member they received a nonsufficient fund fee because they exceeded their six transfers.

Click to view larger image Doug Fecher, president/CEO of $2.8 billion-asset Wright-Patt CU, Beavercreek, Ohio, testifies that credit unions have faced an estimated 180 regulatory changes since 2008 from at least 15 different federal agencies. (CUNA Photo)
"Their initial thought is to blame the credit union, but we have to explain that this is actually a federal regulation that we have to enforce, and frankly, that makes them madder," he said. "We advocate for the bill, and hope for the study. We also hope the outcome of the study is that the number of transactions can almost be tripled without impacting the use of that regulation in terms of monetary policy."

Fecher also commented on the National Credit Union Administration's proposed risk-based capital requirement, laying out for subcommittee members CUNA's significant concerns regarding the proposed rule. CUNA urges the NCUA to withdraw the proposal, due to the belief that it would "seriously constrict credit union growth and financial performance." If not withdrawn, CUNA urges significant changes to the plan as currently proposed.

Also during the hearing, Rep. Denny Heck (D-Wash.) expressed his support for the CUNA-backed  American Savings Promotion Act (H.R.3374), which would allow financial institutions around the country to offer raffle-based, prize-linked savings accounts. Heck said he was "enthusiastic" about the bill, and asked Fecher about benefits of the act, based on his experience.

"The perceived value of the opportunity to win something more meaningful will cause many Americans to establish a savings program that they might not otherwise have done. We've seen that in the institutions that have done this," Fecher said. "As a matter of public policy that's why I support it. We want Americans to save more money, especially ones of more modest means."

The Community Bank Mortgage Servicing Asset Capital Requirements Study Act of 2014 (H.R. 4042) was another bill discussed. The bill would direct federal banking agencies to conduct a study of appropriate capital requirements for mortgage servicing for nonsystemic banking institutions.

"We request the subcommittee amend H.R. 4042 to include NCUA among the agencies conducting the joint study and to delay the implementation of the NCUA's proposed rule until an appropriate period of time after the study has been completed," Fecher said. "In any case, credit union capital requirements on mortgage servicing rights should be no higher than those imposed on small banks."

CUNA also provided testimony on three discussion drafts, most notably the Access to Affordable Mortgages Act of 2014, which amends the Truth in Lending Act to exempt higher-risk mortgages from property appraisal requirements.

Fecher concluded his testimony on behalf of CUNA by asking the subcommittee to work with regulators to ensure that effective dates for new rules provide credit unions and other financial institutions with sufficient compliance time.


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