Removing Barriers Blog

Our Letter to CFPB after HFSC Hearing: Pay More Attention to Credit Union Regulatory Burden
Posted March 28, 2016 by CUNA Advocacy

After Consumer Financial Protection Bureau (CFPB) Director Richard Cordray testified about the Bureau’s Semi-Annual Report in front of the House Financial Services Committee on March 16, we sent a letter to the CFPB following-up on some his statements. Specifically, we took issue with Director Cordray’s dismissal of concerns that we have brought to the CFPB’s attention regarding the troubling rate of attrition among small credit unions. 

During his testimony, Cordray reiterated his opinion that the current regulatory environment is “good news” for credit unions because the topline data is showing  growth in overall lending and membership. As we say in our letter, this line of thinking is problematic, because while large credit union growth is reflected in the overall numbers, a deeper analysis shows troubling trends for smaller credit unions. We now know that the rate of credit union attrition has accelerated since 2010, after the Great Recession and the creation of the CFPB. Our letter emphasizes the indisputable connection between the dramatically higher regulatory costs incurred by small credit unions since 2010 and their higher attrition rates. 

The letter also takes issue with statements made by Director Cordray in response to questions about the CFPB’s authority to exempt credit unions from certain rules. In his testimony Cordray indicated that CUNA sought a blanket exemption during consideration of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) for credit unions, and that Congress considered such a proposal and rejected it. Our letter rejects this statement by expressing that it is not accurate. 

During consideration of the Dodd-Frank Act, CUNA sought and Congress provided, the Section 1022 authority, which was intended to enable the Bureau to focus its regulations on bad actors in the market. Section 1022 gives the CFPB the very significant authority to say, “The credit unions are doing things the right way so we are not going to change the rules for them.” 

However, the letter once again outlines that the law requires that if a statute is plain on its face it should be interpreted using the ordinary meaning of the words. As such, the legislative history of the Dodd-Frank Act and other debate about past discussions is unnecessary, because Congress has very clearly spoken on this issue through the words they put in the statute.  

The letter re-articulated our position on CFPB rulemakings: 

“We understand the importance of regulations to implement law. However, if a regulation results in credit unions – which you have acknowledged are not the problem – providing fewer safe and affordable financial services to their members, then why not tailor the rules to avoid this result, particularly in light of the authority and direction Congress has given the Bureau concerning exemption authority? Again, we are not asking for “no regulation;” we are heavily regulated, and are simply asking for the ability to continue to serve our members in the consumer friendly way we always have.” 

Lastly, the letter thanks Director Cordray for mentioning that credit union small dollar loan products are worth protecting, and that innovation in this area should not be squashed. We are continually urging CFPB that its rulemaking for small dollar loans should not add any regulatory hurdles to state and federally chartered credit union products in this market. 

The letter also invited Director Cordray and his staff to receive a briefing on our recent Regulatory Burden Study.