Credit union leaders are "Storming the Hill" this week during NAFCU's Congressional Caucus with a purpose: to demand relief from the growth of new regulations that affect credit unions' ability to serve their member-owners.
The financial crisis left us with a whole new regulatory environment that demands more vigilant compliance from all financial institutions-even those, like credit unions, that did not contribute to the economic downfall.
Something must be done to ease the burden of this deluge of new regulations. Credit unions need regulatory relief, and they are in Washington, D.C., this week demanding action.
Regulatory relief is more important than ever given the recent court decision to vacate key portions of the Federal Reserve Board's debit interchange rule. The Fed is considering its next step in this case, but credit unions are already seeing a decline in interchange income-even though the current fee cap doesn't apply to most-and this ruling raises the specter of monumental new costs ahead for issuers such as credit unions.
Response No Surprise
In a survey of NAFCU members last year, 94% of respondents said they have seen their regulatory burden increase since passage of the Dodd-Frank Act in July 2010. That's no surprise. The regulatory onslaught continues to compound as credit unions now have more than 5,000 pages of proposals and rules from the Consumer Financial Protection Bureau (CFPB) that they must understand, interpret and ultimately comply with. And that is just one of the regulatory agencies to which credit unions must answer.
There are nearly 700 fewer credit unions today than there were before the passage of the Dodd-Frank Act-evidence of the toll an ever-increasing regulatory burden is having on one of the nation's most important financial sectors.
Simply put, CUs, with their often small compliance departments, must match compliance standards on the same rules and regulations as the largest financial institutions do with their armies of lawyers.
NAFCU has outlined five key areas where credit unions need regulatory relief. Introduced in February and presented to every member of Congress, NAFCU's five-point plan seeks regulatory relief through administrative improvements for the powers of the NCUA, capital reforms, structural improvements for credit unions, operational improvements for credit unions and data security reforms.
'Eliminate Confusion Act'
We've had some legislative victories thus far. Reps. Blaine Luetkemeyer (R-MO) and Brad Sherman (D-CA) introduced H.R. 749, "The Eliminate Privacy Notice Confusion Act." This measure, already passed by the House this session, would remove the requirement for credit unions to mail privacy notices yearly to members even when they don't change their policies. Accompanying legislation, S. 635, the "Privacy Notice Modernization Act of 2013," has been introduced in the Senate by Sen. Sherrod Brown (D-OH) and is awaiting action.
Furthermore, addressing the needs of credit unions specifically, Rep. Gary Miller (R-CA) introduced H.R. 2572, the "Regulatory Relief for Credit Unions Act of 2013," on June 28. The centerpiece of the legislation is a risk-based capital proposal greatly supported by the credit union industry.
Other legislation that eases the credit union regulatory burden includes H.R. 688, "The Credit Union Small Business Jobs Creation Act," introduced by Reps. Ed Royced (R-CA) and Carolyn McCarthy (D-NY) would increase the member business lending cap to a maximum 27.5% of assets for eligible institutions. Complementary legislation, S. 968, the "Small Business Lending Enhancement Act of 2013," was introduced in the Senate by Sen. Mark Udall, D-Colo., and Sen. Rand Paul (R-KY).
Further supporting regulatory relief for credit unions, Reps. Peter King (R-NY) and Sherman introduced H.R. 719, "The Capital Access for Small Businesses and Jobs Act," which addresses supplemental capital for credit unions.
Confidence In CUs
The rapid emergence of these regulatory relief bills confirms the confidence and support Congress has in credit unions and their member-owned, not-for-profit business model. Credit unions provide value to all Americans-members and nonmembers. This was a key finding of a 2012 economic study commissioned by NAFCU on the benefits of the credit union federal income tax exemption. The study found that without credit unions, all Americans would face higher interest rates on their loans, lower interest rates on their deposits and higher fees.
As advocates for the credit union industry walk through the halls of Congress and meet with members in person this week, it is important that the fight for credit union regulatory relief doesn't end here. Credit unions serve 96 million members nationwide, but all of America benefits from their existence. Every member of Congress needs to understand and be continually reminded of this truth and their need to cut the red tape that bars credit unions from better serving Main Street America.
NAFCU and its members urge the nation's leaders to put into action legislative victories that will help credit unions better serve their members and contribute to the nation's economic well-being. By easing credit unions' regulatory burden, lawmakers can help pave the way to job growth, a sustained economic recovery and long-term prosperity.
Dan Berger is president and CEO of NAFCU, Arlington, Va.