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Removing Barriers Blog

CUNA Supports House Small Businesses Committee Hearing on Reg Burden
Posted June 10, 2016 by CUNA Advocacy

Today, the House Small Business Committee Subcommittee on Economic Growth, Tax and Capital Access held a hearing entitled “Bearing the Burden:  Over-regulations’ Impact on Small Banks and Rural Communities.”  

We sent a letter to support the subcommittee’s effort, and we included a summary of our recently published regulatory burden study. The study found that the costs credit unions bear as a result of regulation, even with conservative measures, are extremely high and have increased substantially since the financial crisis and Great Recession.  The cost of regulatory burden to credit unions in 2014 is conservatively estimated to be $7.2 billion ($6.1 billion in regulatory costs, and $1.1 billion in lost revenue).  The $6.1 billion in costs represents 17 percent of operating expenses of the entire credit union system.   

The hearing featured testimony from a community bank president and the President/CEO of the Oklahoma Bankers Association. Both of these witnesses expressed similar concerns with the one-size-fits-all approach to regulation taken by both prudential regulators and the CFPB. This approach makes it difficult to tailor loan products to specific customer needs, especially in rural areas. Such rural banks, like credit unions, often have very few staff to deal with increasing compliance burdens.  

The regulatory burden is particularly significant for smaller credit unions, since larger ones are able to spread compliance costs over a larger asset base.  Smaller credit unions are devoting almost half of their staff time to dealing with regulations, taking time away from their members and impeding their ability to expand services and products offered.   

Our letter stressed that the CFPB needs to exercise its discretionary authority more often so that smaller institutions are not unduly burdened with compliance costs. We hope that in the future the CFPB will use its discretion more often to rein in predatory lenders, abusers of consumers, and those who caused the financial crisis without unduly burdening smaller community financial institutions.