Although 2011 is sure to move our industry past last year's legislative whirlwind, all expectations are that we will now face a regulatory tornado. And, the devil will be in the details, most especially with the Consumer Financial Protection Bureau (CFPB).
A product of the Dodd-Frank Act, the CFPB will have oversight of practically every consumer protection regulation. NAFCU vigorously opposed the CFPB's rule-making authority over our industry for a number of reasons, not the least of which is the fact that credit unions did not participate in the types of activities that led to the nation's economic crisis. Although we supported its intention to address the bad actors that operated beyond the scope of federal oversight, the CFPB's broad and undefined powers promise to exact a high price on Main Street financial institutions like CUs-and by extension, the 92-million members they serve.
It is hard not to reflect upon how we might have avoided this fate if our industry had been united in its opposition. Setting aside for a moment the impact of the additional regulatory burden on every CU, regardless of size, the bifurcation of the industry that has resulted, based on an exemption for CUs with less than $10 billion in assets, seriously undermines our cooperative spirit.
Unfortunately, this bifurcation of our industry is also the proverbial camel's nose under the tent, creating a terrible precedent for future legislation and regulation based on asset size. Going forward, we can only hope this lesson is not lost on those who wavered in this instance.
As we look to the transfer of the Fed's regulatory rule-making authority on consumer issues in July, all eyes are focused on President Obama as he considers who to nominate as the first director of the CFPB. In the interim, Harvard Professor Elizabeth Warren, assistant to the president and special advisor to the secretary of the treasury for the CFPB, is moving rapidly to put in place a structure with key personnel that will be poised to move forward expeditiously in July.
Professor Warren has indicated that first on the CFPB priority list will be credit cards. Yet, Congress passed the broad and sweeping Credit CARD Act in 2009. Consumers should just now be fully feeling the impact of the regulations, which were promulgated last year by the Federal Reserve.
Following credit cards, next on the CFPB's agenda appears to be mortgages. While removal of the conflicting provisions of RESPA and TILA disclosures would be more than welcome news, one can only speculate on the content of the rules that have yet to be promulgated and the impact they would have. Needless to say, every new rule or reg imposes a new expense for CUs and impairs CUs' ability to provide the low-cost, competitive products and exceptional services that their members have come to expect.
In the end, we are bracing for the July 21 transition when the CFPB officially takes over consumer protection, including responsibility for supervising consumer compliance of institutions (those having $10 billion or more in assets) and their affiliates. You may have seen the new website the CFPB recently launched at www.consumerfinance.gov that outlines its mission.
While the CFPB describes itself as a "neighborhood cop on the beat" for consumers, it also states that it "will work to eliminate outdated, unnecessary, or overly burdensome regulations" and to streamline regulation to "aid smaller providers that cannot afford a large compliance staff." That could be one positive outcome of the new law for credit unions!
However, the devil remains in the details, and only time will tell how the CFPB will impact credit unions' bottom line. One thing is certain, though: NAFCU will remain vigilant to ensure that our industry retains its unique, competitive advantages and it is ready to meet the many challenges that may soon come our way.
Michael N. Lussier, president of Webster First FCU, Worcester, Mass., is 2010-2011 NAFCU chair. He may be reached at 800-962-4452.