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This week, CUNA President/CEO Jim Nussle testified before the House Committee on Financial Services during a hearing to discuss the Financial CHOICE Act introduced by Chairman Jeb Hensarling (R-TX). The bill would offer financial institutions of all sizes an exemption from heightened prudential standards under Section 165 of the Dodd-Frank Act, so long as they “strongly capitalized” and “well-managed.” Title I of Hensarling’s bill would reduce regulatory burdens for credit unions and other financial institutions with greater than a 10% leverage ratio. Approximately 65% of all credit unions fall under this category, credit unions that hold approximately 62% of assets and serve nearly 60% of credit union members.
Additionally, the proposed legislation would repeal the Durbin Amendment, a provision under Dodd-Frank that required the Federal Reserve to limit fees charged to retailers for credit card processing.
In his testimony before the committee, Nussle stressed the importance of regulatory relief, saying “A constant refrain I hear from our members is that they're being crushed by regulations implemented mostly in response to a crisis they neither caused, nor contributed to,” Nussle told the committee. “The time and financial costs of regulatory burden impedes the ability of credit unions to serve their members, and is really the leading driver of credit union consolidation, which has accelerated since 2010 and is now at a record pace.”
Nussle also submitted for the record a copy of our comprehensive regulatory burden study, which estimates that regulatory burden cost America’s credit unions and their members $7.2 billion in 2014, up from $4.4 billion in 2010.
“We appreciate that this legislation structures the higher capital threshold as an option, rather than a requirement,” Nussle said. “We would ask you to resist efforts to require credit unions to hold additional capital because this could reduce their ability to lend to credit union members; further, such a requirement would be inappropriate and unnecessary for credit unions because they don’t have a history of capital inadequacy.”
In response to a question about regulatory burden from Rep. Emmanuel Cleaver (D-MO), Nussle stated that there is "no question that regulatory burden has added to a lot of the consolidation speed, quantity of regulations that we all have to be mindful of. " He went on to point out that since Dodd-Frank, credit unions have had to analyze 222 rules from 15 different agencies, totaling over 6000 pages in Federal Register.
In response to a similar question from Rep. Robert Pittenger (R-NC), Nussle pointed out that even if credit unions are exempt from some parts of regulations, they still must take time to read through the entire regulatory text to determine how and to what extent they are exempt.
Rep. Randy Hultgren (R-Ill.) said he was concerned about the “one-size-fits-all” regulatory approach, and Nussle stated that CUNA is working to ensure that regulators understand the difference of the credit union model.
Rep. Keith Rothfus (R-Pa.) expressed concerns about credit union products and services that are negatively impacted by overregulation, and also said he was worried that additional compliance costs will be borne by consumers. He asked Nussle for any examples of credit union products and services affected by over-regulation.
“Mortgages, for instance,” Nussle responded. “Some of our smaller institutions that don’t do that many, they’re in smaller areas, that’s one that I often hear that is severely curtailed. If you’re trying to establish credit, if you’re trying to buy a home, that’s pretty tough for people in that community to not have that access.”
Nussle reiterated that credit unions are “part of the solution” when that Congress should be turning to in order to increase access to capital, opportunities and jobs.
“People will search out credit, they’re going to go find money. The question is, do you want them to go to a regulated, safe and sound institutions or into a predatory situation?” Nussle said. “I think [regulatory burden] is making it more difficult to build and establish that credit in a safe and sound way.”
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