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CU Advocates: Dodd-Frank, CFPB Are in the Crosshairs Now

Republican Donald Trump's victory in the U.S. presidential race Tuesday night has elicited a wide spectrum of reaction and opinion across the country and the globe, but what will a Trump White House and a Republican-controlled House and Senate mean for credit unions?

Generally, CU advocates are taking a cordial and cautious approach to the president-elect, but seem optimistic that Trump will support measures to lighten the regulatory burdens that credit unions currently endure.

Jim Nussle, president and CEO of Credit Union National Association (CUNA), congratulated both Trump and Vice President-elect Mike Pence in a statement, saying the trade group "look[s] forward to working with Mr. Trump and his team on issues vital to America's middle class and the credit unions that serve them.”

Brad Thaler, vice president of legislative affairs at National Association of Federal Credit Unions (NAFCU), said that he believes a Trump presidency — in tandem with Republican control of the House and Senate — will likely lead to regulatory relief for credit unions.

Trump, Thaler explained, has expressed his opposition to "over-regulation” on the financial services industry.

"Senator Mike Crapo [Republican of Idaho] is in line to become the chairman of the Senate Banking Committee and he has a long history of opposing excessive regulations on the financial services industry,” Thaler said. "With Chairman [of the House Financial Services Committee Jeb] Hensarling and Crapo, we are very optimistic that by next year, we will start seeing some meaningful opportunities for regulatory relief measures.”

Indeed, in August 2016, Crapo told members of the Coeur d'Alene Chamber of Commerce in Idaho that "over-regulation is quickly catching up to the national debt as one of our top threats." Crapo added that "it's gone beyond safety and soundness to government control. I'm not saying all regulations are bad; I'm saying they don't need to be at this level. There's a cost to compliance."

‘Real and Numerous' Opportunities

John McKechnie, senior partner at Total Spectrum in Washington DC, and a former official at both the National Credit Union Administration (NCUA) and CUNA, said that the opportunities for regulatory relief from the Trump Administration, working in concert with two Republican chambers on the Hill, are "real and numerous.”

"I wouldn't be surprised to see President Trump take a page from the Obama playbook on executive orders and make changes to Dodd-Frank regulations that are considered onerous by many in the private sector,” he stated. "Mortgage regulations are already being discussed as prime targets for revision.”

And then there's the matter of the Consumer Financial Protection Bureau (CFPB), McKechnie added.

"Not only should we expect a push early next year to create a multiple-member CFPB board in place of the current single administrator, but also the Bureau's budget could be brought under Congressional oversight,” he said.

But those changes pale in comparison to what could happen with CFPB director Richard Cordray in a Trump Administration, said McKechnie. "Last month's court decision limiting the independence of CFPB's director could provide an opening for President Trump to actually remove Cordray,” he proposed. "Remember, the government has until November 25 to appeal that decision, and credit unions should pay close attention to developments in that area.”

Remaking the NCUA Board

Dennis Dollar, a former NCUA chairman and now an Alabama-based credit union consultant, said there is "no doubt” that the Trump victory, coupled with the Republicans retaining control of the House and Senate, will bring about changes at both the NCUA and the CFPB.

"If history holds true, it is likely that Trump will make the sitting Republican board member [J. Mark] McWatters into NCUA chairman shortly after [Trump] is sworn in,” he specified. "The second board member nominated in 2017 will be another Republican, probably much more aligned with McWatters than with the [Debbie] Matz and [Rick] Metsger approach at NCUA.”

That change, combined with Metsger's term expiring in August 2017, Dollar noted, will have an impact on the second field of membership (FOM) regulation and likely on the supplemental capital issue as well.

"Both are much more likely to move under a Chairman McWatters,” he added.

Moreover, President Obama's nomination of John A. Herrera to the NCUA board is "certainly dead” at this point, Dollar added. But he thinks Herrera is a "real possibility” for consideration for the Democrat slot on the board that will come up with the summer of 2017 expiration of Metsger's term.

Geoff Bacino, partner at Bacino & Associates, also believes that Trump's victory will lead to changes at NCUA. "The first thing that they will do is to name McWatters as the chairman,” he said. "This could be done as soon as January 21st and does not require Senate action.”

Bacino further said that the CFPB and Dodd-Frank will be "in the crosshairs,” as Republicans have been waiting for their chance to "gut” the agency and roll back some of the legislation's provisions.

Patrick La Pine, president and CEO of the League of Southeastern Credit Unions & Affiliates (LSCU) said that while Donald Trump has not specifically addressed credit unions in his economic plans, but he pointed out that this will be the first time since 1928 that an incoming Republican president will start his first term with a majority in the House and Senate, so the "environment should be conducive for positive changes for credit unions if combined with strong impact at the national level.”

Wait and See

Some other credit union advocates took a somewhat tempered and wait-and-see perspective on the new president.

"We'll have to see what the new Congress and Trump administration hold for the state credit union system,” said Pat Keefe, VP of communications at National Association of State Credit Union Supervisors (NASCUS). "But we look forward to working with the administration when it takes office, as well as members of the incoming 115th Congress. We will of course continue to advocate on behalf of the state system, and serve as the system's voice before the federal government.”

Similarly, RJ Tamburri, communications director at New York Credit Union Association (NYCUA), said that it's too early to tell exactly how Donald Trump's presidency will impact credit unions, but added that based on Trump's comments on the campaign trail, he "appears ready to work with the Republican-controlled Congress to undo or scale-back at least parts of the Dodd-Frank Act.”

Depending on how that's done, Tamburri noted, it could bring about either "significant regulatory” relief or more confusion for credit unions. "In particular, the future of the CFPB and its leadership are unclear,” he added.

For NYCUA, Tamburri surmised, little will change in terms of their strategy. "We'll continue building on the strong relationships we have with our state and federal policymakers, and advocating for a better operating environment for the state's credit unions,” he said. "But we're hopeful that real mandate relief will be coming.”

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