Undoubtedly, 2010 will be characterized as one of the most challenging legislative years with the passage of the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act.
As a result, 2011 will likely be defined by Congressional oversight of the rulemaking required to support the new legislation. The 112th Congress will also be adding a number of new faces. With each party controlling a chamber of Congress, gridlock is likely to prevail on many issues. Together, these elements create many uncertainties for credit unions. They also provide fertile ground for NAFCU to continue to champion credit unions' unique status and promote their critical role in the financial fabric of our country.
In the attempt to rein in many of the bad actors who led to the economic crisis, Dodd-Frank created new burdens for good actors, such as credit unions. Furthermore, merchants capitalized on a weakened financial services community by attaching an amendment to limit debit interchange fees to this legislation.
NAFCU stridently opposed the interchange amendment because we knew it would not translate into benefits for consumers and that credit unions below $10 billion in assets, despite their exempt status, would be negatively impacted by the new debit swipe fee limit. We have continued to voice our concerns over this legislation's impact. When the Federal Reserve released its proposed rule on interchange fees recently, NAFCU urged full consideration of costs credit unions incur when administering card programs-including fraud protection, data breach and support costs-in assessing 'reasonable and proportional' fees. While the Federal Reserve was challenged by a poorly drafted law, the proposed cap on transaction fees could have a devastating impact on credit unions and their 92 million members. NAFCU is eager for member feedback by January 31 to incorporate in its comments to the Federal Reserve. We will continue to seek amendments to hold merchants more accountable for data breaches and fraud, and counter any efforts to extend price controls to credit interchange fees.
An APB On The CFPB
Another result of the Dodd-Frank Act was the establishment of the Consumer Financial Protection Bureau (CFPB). Beginning in July, CFPB will oversee consumer credit rules currently promulgated by seven different federal agencies. Upon Elizabeth Warren's appointment by the president to be his assistant and special advisor to the Treasury secretary on CFPB, NAFCU ensured she was well aware of CU concerns. Warren made her inaugural appearance in this role at NAFCU's Congressional Caucus, followed by a private meeting with the NAFCU board and a subsequent one-on-one meeting with NAFCU President Fred Becker.
As the 112th Congress holds oversight hearings and looks for possible changes to Dodd-Frank, NAFCU will continue to seek amendments to lessen the regulatory burden on credit unions that this law creates, including:
• Expanding transition time for the full implementation of Dodd-Frank-up to 24 months for some areas-to help alleviate some of the new compliance burdens for credit unions.
• Indexing of all monetary thresholds in the bill annually for inflation to keep the intent of the legislation intact over time.
• Clarifying preemption authority by CFPB of the consumer rules promulgated by NCUA.
• Narrowing of language concerning unlimited access to financial reports by CFPB.
Some other issues of vital importance to CUs, based on earlier legislation, also are unresolved.
Continued Focus On MBL Relief
In June, Sen. Mark Udall (D-Colo.) introduced an amendment to H.R. 5297, the Small Business Lending Fund Act of 2010, which would expand credit union member business lending by raising the arbitrary member business lending cap to 27.5% for eligible credit unions. This amendment represented a carefully crafted compromise between key lawmakers, NCUA and Treasury. NAFCU will continue to pursue lifting the MBL cap with renewed vigor in the 112th Congress.
Additionally, NAFCU has been a stalwart advocate for capital reform that preserves mutuality. NAFCU will ask that Congress amend current law to make all credit unions subject to risk-based capital standards, and direct NCUA to consider risk standards comparable to those of FDIC-insured institutions. This would afford credit unions much-needed flexibility in assessing their own risk and ability to lend. NAFCU also supports amending the Federal Credit Union Act to allow the inclusion of certain uninsured capital instruments in a credit union's net worth.
While the recession has been declared over, the economy continues to struggle. As the deficit grows, the budget hawks in Washington are keenly aware of it. The remedy is likely to come in the form of tax hikes and spending cuts. In December, the National Commission on Fiscal Responsibility and Reform issued its report to address fiscal challenges. Unfortunately, the commission, by implication, included the CU tax exemption with other tax expenditures that could be eliminated. The report, while not garnering the necessary votes to proceed, however, heightened the nation's attention to the deficit and the difficulties we will have in achieving a balanced budget. Rest assured NAFCU will remain vigilant on this issue.
Ultimately, other issues may continue to arise that will impact CUs, and it is all the more important for you to redouble your commitment to your members. Local outreach is critical to showcase the significance of credit unions in your community as NAFCU advances FCUs from a national perspective with Congress, Treasury, the Fed, the CFPB, NCUA and the Obama administration.
Michael N. Lussier, president and CEO of Webster First FCU, Worcester, Mass., is 2010-2011 NAFCU chair. He may be reached at 800-962-4452