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In his speech before CUNA’s Governmental Affairs Conference, CFPB Director Richard Cordray outlined several areas in which he
believes credit unions and the CFPB can work together. He noted that credit
unions provide enormous value to millions of people around the country and are
consistent stewards of consumer interests. And, he applauded credit union
efforts to advance financial education. Nevertheless, he continued to
articulate his view that despite that credit unions are “not the culprit in the
financial crisis” they should still be subject to rulemakings aimed at reigning
in the abusers of consumers.
The director also argued
that the CFPB has not hurt credit unions because credit union lending and
membership have grown since the imposition of the new rules. There is no
disputing that large credit unions are indeed doing well, and these credit
unions drive these overall numbers. However, the attrition rate of smaller
credit unions has accelerated since 2010. In other words, the rate of decline
in the number of credit unions in the years since the financial crisis is
greater than it was during the crisis.
Director Cordray suggested
in his speech that credit unions should accept the current state of things as
“good news” and that the American dream has been made stronger by the changes
coming out of the CFPB. This perspective is very concerning because as outlined
in our recently released_Regulatory Burden study, there are some very
alarming trends for small credit unions. The study shows that the financial
impact of regulation has increased by 40 percent since 2010, and the relative
impact is over three times greater at smaller than at larger credit unions. It
also found dramatic evidence of differential impacts by credit union size. Cost
impacts were much stronger at smaller versus larger credit unions. There are
basic fixed costs associated with complying with regulations, and at larger
credit unions these costs can be spread over a larger asset base.
CUNA’s economists have outlined why regulatory burden weighs heavily on credit unions’ ability
to serve members – particularly in mortgage lending. Although the economy and
business conditions have improved during the last five years, the weight of new
rules and regulations has been too much for many smaller credit unions.
Director Cordray dismissed the concerns CUNA raised regarding recent mortgage
lending rules, claiming the Bureau proved everyone wrong because mortgage
lending is strong and no lawsuits have been filed against credit unions.
These statements are premature at best, and reveal a shallow understanding of
the immense compliance burden the totality of these new mortgage rules are
placing on credit unions. The CFPB missed the point that many of these new
mortgage requirements are forcing credit unions out of the marketplace on a
daily basis, and impacting credit union members’ ability to be able to rely on
these safer and more affordable options. The topline data – driven by the
larger credit unions – might look good, but at the operational level for small
credit unions these rules are having real and adverse impacts. For
example, smaller credit unions are devoting almost half of their staff time to
dealing with the impacts of regulations. This is taking away from face-to-face
time with members and in some instances impeding their ability to expand
Cordray also left out of his speech some of the other problems past rulemaking
have caused credit unions-- most notably the international remittance transfer rule, which caused almost half of credit
unions either to stop offering or reduce remittances services.
Cordray said many positive
things about the credit union industry in his speech. Going forward we will
continue to urge the CPPB to look at the entire picture of how rulemakings are
impacting credit unions, particularly small credit unions. But, we disagree
with this assessment that the current state of regulatory burden in the
marketplace is “good news.” It is far from that.
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Credit Union National Association is the most influential financial services trade association and the only national association that advocates on behalf of all of America's credit unions. We work tirelessly to protect your best interests in Washington and all 50 states. We fuel your professional growth at every level and champion the credit union story at every turn.
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