Asking for deregulation is one thing. Actually getting it, of course, is another. But more: implementing it is a whole other ball game.
Credit unions are lobbying hard for regulatory reform – most notably related to a variety of aspects of the Dodd-Frank Act, including the structure and purview (or even the very existence) of the Consumer Financial Protection Bureau, the Durbin Amendment and more. But some credit union advocates worry that CUs haven’t thought through what happens next.
“Credit unions are all very hopeful that the Durbin Amendment will be repealed, but they need to be thinking about what happens after that,” said Tom Davis, SVP of finance and technology at Card Services for Credit Unions, during a break in the action at CUNA’s Governmental Affair Conference.
Take the disaffiliated networks requirement under Durbin. Credit unions have had to sign a number of contracts — most of them for relatively long terms, such as five years — to fulfill that requirement, Davis noted. “How do you unwind those contracts? What if you signed a five-year contract six months ago and Durbin is repealed in the next six months? You’ll still have four years left on that contract. What if you have a contract that is about to expire – do you renew it? For how long?”
Moreover, the constant refrain on Capitol Hill right now is not merely “repeal,” it’s “repeal and replace.”
“We need to be thinking about what we could wind up with instead and think it through,” he said. “This is how unintended consequences happen. You don’t want to wind up with something that is actually worse than what we had before.”
Mark Sievewright, who shortly will be ending his tenure with Fiserv to get back into the research and consulting arena, agreed. “There’s an incredible amount of unpredictability right now,” he observed just days before GAC attendees would head out to lobby their lawmakers. “And the mood and tenor on Capitol Hill is very different. I heard from a number of league presidents that this could be very a different Hike the Hill experience for credit unions this year.”
Much of that unpredictability is also wrapped up in just how quickly Trump and Congressional Republicans will be able to act on their deregulation pledges.
“There’s a very compressed Congressional calendar, a very compressed timeline,” said former Sen. Mark Begich during a GAC break-out session, pointing to appropriations bills, the debt ceiling and other issues on which Congress is required to act on a specific schedule, as well as scheduled breaks. The former Democrat from Alaska is now a strategic adviser at the Washington political consultancy Brownstein Hyatt Farber Schreck LLP.
Indeed, several Capitol Hill observers expressed concern that credit unions may be harboring “unreasonable expectations” about how soon “real change” will come.
“First, you’ve got to get all the politicians on board, and that takes time and lots of it,” said a former Hill staffer who spoke on the same panel as Begich. “People are thinking, ‘there’s a Republican in the White House, Republicans have a majority in both the House and Senate—this stuff should fly right through,’ but that’s not going to happen. And it’s not just because the majority in the Senate isn’t big enough. It’s because of the increasingly fractured, polarized tenor on Capitol Hill.”
And even once a bill gets pushed through, as Davis noted, there’s still the question of actual implementation. Case in point: the Financial Accounting Standards Board’s changes to Current Expected Credit Loss.
Several credit union vendors in attendance at the Capitol Hill conference brought up CECL.
“CECL is the big elephant in the room,” CU Direct vice president of analytics and advisory services Mike Cochrum told Credit Union Journal during CUNA’s GAC. “They’ve got four years to comply, so many of them are waiting because they think they have time.”
The problem is, they really can’t afford to wait, he said. “About 90% of credit unions probably don’t even have the requisite data to comply,” he explained. “We believe we can help credit unions deal with that, but they can’t wait on this.”
But wait they will, another vendor who didn’t wish to be named noted. “If they’re waiting on something they already know is coming, that has already been passed, something they actually can plan for, how do they expect to be ready to implement something like the repeal of Dodd-Frank,” he asked.