Removing Barriers Blog

Letter to House in Support of Reg Relief and TAILOR Act
Posted March 01, 2016 by CUNA Advocacy

Today, we sent a letter to the chairman and ranking member of the House Financial Services committee to offer our support for H.R. 2896, the Taking Account of Institutions with Low Operation Risk (TAILOR) Act.  

This legislation will decrease regulatory burden on credit unions and community banks with lower risk profiles relative to systemically significant institutions, by requiring federal regulators to take risk into account when promulgating regulations. 

Specifically, the legislation would direct the banking agencies, and NCUA and CFPB to:

  • Take into consideration the risk profile and business models of institutions subject to regulatory action;
  • Determine the necessity, appropriateness, and impact of applying that action to such institutions; and
  • Tailor regulatory action so as to limit the burden of regulatory compliance as befits the risk profile and business model involved.
  • Assess the impact that such regulatory action has upon the ability of the institution to flexibly serve evolving and diverse customer needs,
  • Consider the potential unintended impact of examination manuals or other regulatory directives that work in conflict with the tailoring of such regulatory action, and the underlying policy objectives of the regulatory action and statutory scheme involved

Credit unions are precisely the type of institutions for which 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. 

Although we constantly hear policymakers accurately stating that credit unions did not contribute to the financial crisis, the public policy response to the crisis, so far, has failed to recognize this seemingly indisputable fact.  Credit unions have been subjected to tens of thousands of pages of new regulations in the last seven years and this must stop.

Constant regulatory changes present a challenge for small depository institutions because the fixed costs of compliance are proportionately higher for smaller-sized credit unions and banks than for large institutions.  Congress and regulators ask a lot of small, not-for-profit, financial institutions when they tell them to comply with the same rules as J.P. Morgan, Bank of America and Citibank.   

Our letter stressed to the committee that overregulation is one of the primary reasons that small financial institutions are disappearing at an alarming rate.  Over the last 20 years, the number of credit unions has been cut in half – from more than 12,500 in 1995 to just more than 6,000 today.  For the last several years, the rate of regulatory and compliance-driven credit union consolidation has led to the loss of one credit union per day, on average.  

We believe that when there are fewer credit unions for Americans to turn to for safe and affordable financial services, consumers are increasingly forced to turn to other providers who are more concerned with their bottom line than the borrower’s needs, like the too-big-to-fail financial institutions whose activity caused the financial crisis, or nonbank predatory lenders who are known to abuse consumers. Needless to say, this outcome is the opposite of what post-financial crisis legislation intended.

We closed our letter bluntly: the continuing failure to address the regulatory and compliance crisis facing credit unions has jeopardized their ability to serve members, and threatens the financial opportunities of Americans.