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Nothing happens in a vacuum. We did not just wake up one morning and say
to ourselves, “Let’s see if we can get Congress to write a letter to the
CFPB.” No, the letter that nearly 330
Members of the House of Representatives sent the CFPB this week was not
spontaneous and it is not an isolated action.
Rather, it is the manifestation of frustration and concern on the part of
CUNA, Leagues, credit unions and Congress that the Bureau designed to protect
consumers of financial products has not sufficiently tailored its rules towards
providers that, before the Dodd-Frank Act, were not regulated, and other
abusers of consumers.
How did we get to a place in which so
many from both parties came together to send a unified message to the
CFPB? This is what happens when a
government agency is not implementing the laws under its purview as Congress
intended or desires. It is really as
simple as that.
Nearly six years into the Bureau’s
existence, there is considerable concern that the Bureau’s rulemakings are
adversely effecting credit unions and small banks’ ability to serve their
members and customers. It is making safe
and affordable financial services, like remittances,
less available and more expensive. This
is not the result that anyone in Congress desired, which is why they gave the
broad authority to design rules that target abusers
and leave the good actors unharmed.
While we are grateful there are some exemptions for smaller credit
unions in the qualified mortgage requirements, in the vast majority of cases
the Bureau has not meaningfully used this authority.
CFPB Director Cordray told CUNA’s
Governmental Affairs Conference (GAC) that he has considered our argument that
the authority the Bureau has is broader than the manner in which the Bureau has
used it, and rejected the argument.
“Your leadership has
strenuously made the suggestion that, in light of this history, the Bureau
should simply exempt credit unions altogether from consumer financial
protection laws. They have argued that the law would allow us to do that.
I have considered their arguments carefully and I do not believe that is
correct. The U.S. Congress had all of these suggestions in front of it
when the Dodd-Frank Act was being written. But Congress did not do that,
and though it gave us some amount of exemption authority, it is not plausible
to me that we could use such authority to override Congress’s own judgment on
such a broad-based policy matter. Instead, Congress said that all
financial institutions have to play by the rules, and we have to enforce
them. That is our charge. But that does not mean one size
necessarily fits all. Congress itself drew some thresholds and tiers that
distinguished larger institutions from smaller institutions, such as its
provision giving us supervisory authority over banks and credit unions with
more than $10 billion in assets but not those with less. So where we
can customize our rules to treat smaller institutions differently in light of
their compliance burdens and the level of risk they pose, we have done so and
will continue to do so.” (emphasis
CUNA appreciates Director Cordray's
participation at our GAC, however we disagree with his statement and analysis.
There is no evidence that Congress ever considered exempting credit unions and
small banks from the regulatory authority of the CFPB. No such amendment was offered during
committee, floor or conference committee consideration. If such a proposal had been on the table, we
would have strongly supported it. After
all, the National Credit Union Administration has an office of consumer
protection that already serves an important role for credit union members. But no Member of Congress ever proposed
that. That is an argument for another
crux of our disagreement with the Bureau is whether they are using the
authority that they have under the law – the authority that the Director
identifies above to “customize our rules to treat smaller institutions
differently in light of their compliance burdens and the level of risk they
pose” to the extent necessary. We
contend they have the authority to do much more than what they have already
done. Moreover, they have not been shy to arguably test the limits or go beyond
the authority Congress has granted to them in areas like the auto industry.
Yet, they are arguing they don't have authority to do something Congress
explicitly told them they can do. This dichotomy is puzzling.
All credit unions – even Navy Federal
Credit Union – are small relative to the mega banks that serve the largest
number of consumers and pose the greatest risk to the financial sector. Each of
the four largest banks is larger than the entire credit union system! Credit unions collectively and individually
are such unique players in the broader market that it makes sense that a Bureau
that can “customize our rules to treat smaller institutions differently in
light of their compliance burdens and the level of risk they pose” should
do that for all credit unions and similarly sized banks.
It also makes sense for the Bureau in
the course of customizing their rules to say to providers that have a history
of treating consumers well that they can continue to follow the rules that have
been working. Why do credit unions need
new regulations on small dollar loans when members they serve have access to
safe and affordable products under the current regulatory requirements? Similarly, if consumers are not complaining
about products and services offered by credit unions, why rock the boat? Leave well enough alone for those doing a
good job, and focus on the bad actors.
That’s the message that Congress is
sending through this letter. They’re
telling the Bureau to make sure that the rules they are issuing do not result
in fewer or more expensive financial services options for consumers using
credit unions and small banks. They’re
urging the Bureau to use the exemption authority that Congress conveyed to do
What is really remarkable about this
letter is not only the number of Members that signed it, but the fact that it
earned the support of the majority of both parties. CFPB matters can be politically divisive. Supporters of the Bureau cast those critical
of the Bureau as wanting to neuter or eliminate it. Opponents of the Bureau cast those who
support the Bureau’s mission as liberals that support overregulation. This letter attracted strong bipartisan
support because it is not about whether the Bureau should or should not
exist. It’s about the real world impact
of the Bureau’s regulations and the result desired by consumers’ elected
Credit unions do not want consumers of
financial products to be abused; rather, we want to serve consumers with safe
and affordable products as this is the reason for our existence. Through this letter, the broad majority of
Democrats and Republicans in Congress are united behind that message. It’s a message that we hope the CFPB will
heed; it’s a message we will continue to encourage Congress to deliver.
Chief Advocacy Officer
Champion for the Credit Union Movement
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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