Compliance Blog

Written by Steve Van Beek

In late September, the CFPB issued a draft version of their Strategic Plan for 2013-2018.  As part of process, the CFPB solicited public comment on their plan.

NAFCU issued a comment letter imploring the CFPB to focus on nonbanks and payday lenders rather than create additional regulatory hurdles for credit unions:

"At the outset, NAFCU would like to reiterate our support for efforts to wheel in deceptive and unscrupulous practices. Credit unions, as CFPB officials have acknowledged numerous times, do not engage in these unscrupulous practices, are consumer-friendly entities, and did not cause the financial crisis that triggered the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Due to their cooperative structure, tradition and mission, credit unions are guided by principles that focus on the well-being of their membership and operate in a manner that confers great benefits to their approximately 94 million members. Thus, it is unnecessary for the CFPB to impose greatly burdensome regulations on credit unions.

NAFCU believes the CFPB’s strategic plan fails to place adequate focus on unregulated entities, such as nonbanks and payday lenders. The mission that Congress delineated to the agency is to "help protect consumers from unfair, deceptive, and abusive acts that so often trap them in unaffordable financial products." See Senate Report No. 111-176, at 11 (2010). The failure of the strategic plan to focus on predators, and instead signaling that it would continue to impose unnecessary regulatory burden on consumer-friendly and highly regulated credit unions, simply misses the target that Congress set for the agency. This misguided approach, we believe, can foreseeably lead to results that will hurt consumers, such as drying of credit and exiting of credible market participants from the various markets the agency is regulating."

The comment letter continues by explaining how the CFPB's current approach - including their inadequate exemptions for credit unions - are forcing credit unions to alter their business plans even though credit unions where not the institutions harming consumers:

"Since its inception, the CFPB has taken a uniform approach to regulation, including regulations that apply to credit unions. While many of the agency’s regulations implementing the Dodd-Frank Act are still in the proposal stage or not yet effective, the anticipated impact on credit unions is already being felt as credit unions begin to plan ahead. Unfortunately, it is becoming apparent for many that the agency’s regulations will cause them to take drastic action to offset the resulting costs or, in some cases, discontinue programs. For example, the agency’s final rule on remittance transfers has proved to be so unworkable that many credit unions plan to leave the market altogether. Thus, with shrinking options and loss of such reliable market participants, the final rule on remittances will likely have a net negative impact on consumers absent a market-based competitive solution that will enable credit unions to continue to provide this product in a cost-effective manner."

Hopefully the CFPB takes a hard look at how their first final regulation (on remittances) and their future mortgage regulations are impacting the market and drastically increasing the operating and compliance costs for credit unions.  And, importantly, how their regulations may result in less competition in the financial services market and less choice for consumers as credit unions do not have "an army of lawyers" to keep up with regulatory changes.  

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NAFCU's Office Closed on Monday.  We'll be back blogging on Tuesday.