Removing Barriers Blog

CUNA Weighs In on Hensarling Regulatory Relief Proposal
Posted July 17, 2016 by CUNA Advocacy

Last week, CUNA made its first major comments on Chairman Hensarling's Financial CHOICE Act.  On Tuesday, Jim Nussle testified on Title I of the bill, which would allow credit unions with a leverage ratio over 10 percent to operate under a reduced regulatory burden.  And, on Friday, we responded to a Committee request for our views in a letter that discusses the remaining provisions of the bill.

Here are some highlights from our letter:

NCUA PROVISIONS

  • NCUA Board: We support increasing the NCUA board membership from three to five. “Expanding the board to five seats reduces the likelihood that NCUA will have only one board member at any time; it also provides flexibility for the board members to work more collaboratively than they have been able to do heretofore.”
  • NCUA Budget:  We support making NCUA budget process more open and transparent.  “Members of the credit union community should be able to examine and comment on the agency’s budget before adoption.”. 
  • Overhead Transfer Rate:  We support “greater transparency with respect to the overhead transfer rate, that is, the means through which the NCUA allocates resources annually from the National Credit Union Share Insurance Fund (NCUSIF) to cover insurance related expenses.”
  • NCUA Under Appropriations:  We oppose bringing the NCUA into the regular appropriations process.  “Maintaining a separate, independent federal regulator and insurer is critically important to the credit union system, and the structural and mission-driven differences between credit unions and banks necessitate such a regulatory scheme.  We are concerned that subjecting NCUA to the appropriations process could blur the independence of NCUA and the credit union system.”
  • Examination Frequency:  We support extension of exam cycle to 18 months. “CUNA supports the CHOICE Act provision lengthening the examination period from one year to at least 18 months for well-managed, well-funded credit unions with under $1 billion in assets.”
  • Examination Fairness:  We support exam process reforms “CUNA also supports reform of the financial institution examination process to create an independent ombudsman and independent examination appeals procedures.”  “[These provisions are a] vital step toward ensuring that federal financial institution regulators conduct fair exams for those they supervise…”

CFPB PROVISIONS

  • CFPB Leadership: We support changing CFPB from one director to five-person commission. “Many independent agencies, including the NCUA, are controlled by a board whose members share power over an agency.  A commission would serve as a source of balance and stability for consumers and the financial services industry by encouraging internal debate, deliberation and compromise, ultimately leading to increased transparency and better policymaking.”
  • CFPB Appropriations Process:  We support bringing CFPB under appropriations process. “Placing the Bureau under the appropriations process is a step in the right direction toward ensuring that credit unions and other small financial institutions do not pay for the misdeeds of other entities through additional regulatory burden.”
  • Arbitration Rule:  We support repeal of CFPB’s authority to restrict arbitration. “Arbitration can be a helpful alternative for credit unions and their members to resolve differences in a fair, efficient, timely, and cost-effective manner, and the Bureau's arbitration proposal is a de facto ban on the effectiveness of the arbitration process.”
  • TAILOR Act:  We support the Taking Account of Institutions with Low Operation Risk (TAILOR Act).  “The TAILOR Act would instruct the CFPB, the NCUA, and other regulators to account for an entity’s size and risk in promulgating regulations.  Credit unions are precisely the type of institutions that this legislation is designed to help because they are well-capitalized, with a low risk profile and a long history of meeting their members’ credit needs in good times and bad.”
  • CFPB Credit Union Advisory Council:  We support the Credit Union Advisory Council at CFPB. “Maintaining the Council at the CFPB could help ensure that policymakers within the federal government understand the credit union difference, as well as the impact of regulatory decisions on credit unions.”
  • REINS Act:  We support inclusion of the REINS Act which “would require the CFPB (and other regulators) to obtain Congressional approval before issuing regulations likely to have an economic impact of $100 million or greater.”

DURBIN AMENDMENT

  • Durbin Repeal:  We support repeal of the Durbin Amendment price-fixing on debit transactions. “Since implementation, members of America’s credit unions and customers of other financial services providers have been forced to transfer more than $36 billion to the big box retailers with no public benefit.  Repealing the Durbin amendment would restore balance and market functionality by ending main street financial institutions’ subsidy to the largest retailers.”

HOUSING PROVISIONS

  • HMDA Reporting Requirements:  We support raising the thresholds for HMDA reporting requirements. “This legislation would raise the threshold that triggers these reporting requirements to 100 closed-end and 200 open-end mortgages.  This would provide much needed relief, particularly to smaller credit unions…”
  • HMDA Study: We support requiring GAO to examine whether additional HMDA data reporting could cause consumers harm.  “The Bureau will now require credit unions that have originated 25 or more closed-end mortgage loans or 100 or more open-end loans in the prior year to report dozens of data points in addition to what is required under the Dodd-FrankAct.”   “Assessing the impact of increased data reporting will ensure that credit unions, which did not cause the financial crisis, are not unduly burdened.”
  • Mortgage Choice Act:  We support inclusion of Mortgage Choice Act. “[These provisions] would adjust the definition of points and fees to ensure greater consumer choice in mortgage and settlement services under the Ability to Repay/Qualified Mortgage Rule.”
  • Portfolio Lending and Mortgage Access Act: We support inclusion of Portfolio Lending and Mortgage Access Act.  “[These provisions] would benefit credit unions by treating mortgages held in portfolio as qualified mortgages for purposes of the CFPB’s mortgage lending rules.”
  • RESPSA Escrow Requirements:  We support exempting mortgages for institutions under $10 billion in assets and held in portfolio for three years from RESPA escrow requirements and exempting mortgage servicers servicing fewer than 20,000 mortgages annual from RESPA Section 6 requirements.  “We believe that the Bureau has the authority to make these exemptions under the existing authority which Congress conveyed to keep the regulatory burden on community financial institutions limited while the Bureau directed its rulemaking to large banks and the abusers of consumers.  Unfortunately, the Bureau has not exercised this authority to the fullest extent possible, making this legislation necessary in order to ensure these rules are appropriately focused.” 

OTHER PROVISIONS

  • Senior$afe Act:  We support the Senior$afe Act.  “This would protect credit unions who in good faith report suspected financial elder abuse from any liability resulting from such reporting.”
  • Operation Choke Point:  We support limiting Operation Choke Point.  “This would prevent the federal government from terminating credit unions’ relationships with certain customers without just cause; the reason for termination cannot be solely the reputational risk of the credit union member…. Reforming Operation Choke Point allows credit unions to serve their members without the federal government making ideological policies limiting this service.”
  • Savings and Loan Charter Flexibility:  We oppose allowing S&Ls to operate with duties and responsibilities of national banks unless similar legislation enhancing the flexibility of the credit union charter is added.  “Continuing to subject credit unions to the member business lending cap ignores credit unions’ history of serving this market and insults small businesses seeking access to credit from credit unions otherwise willing and able to lend to them.  While S&Ls were chartered for the specific purpose of mortgage lending, credit unions have been offering business purpose loans to their members for over 100 years.”

We also urged the chairman to take advantage of the opportunity that this type of broad regulatory relief legislation presents, by including provisions to completely and unconditionally eliminate the credit union member business lending cap.