CFPB hearing follow up letter

WASHINGTON, DC (March 22, 2016)

Dear Director Cordray:

On behalf of the Credit Union National Association (CUNA), I am writing to address statements made to the House of Representatives Financial Services Committee during the March 16, 2016, hearing entitled, “The Semi-Annual Report of the Bureau of Consumer Financial Protection.” As you know, CUNA represents America’s state and federally chartered credit unions and their more than 100 million members. We appreciate the ongoing dialogue in which the Bureau has engaged with CUNA and our member credit unions. However, we would like to see more dialogue and attention directed at the concerns of credit unions regarding regulatory burden, particularly the data we have brought to your attention concerning the troubling rate of attrition among small credit unions.

Regulatory Burdens Unquestionably Continue to Plague Credit Unions and their Members

After the overwhelming majority of the U.S. House of Representatives sent a letter to the CFPB this week urging it to exempt credit unions and community banks from certain rulemakings, several Members of Congress questioned you about the Consumer Financial Protection Bureau’s (CFPB) unwillingness to use its Section 1022 exemption authority in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in a more meaningful way. Specifically, Representative Steve Stivers (R-OH) pointed out that the CFPB should be using its authority to exempt credit unions from certain rulemakings, citing the detrimental impact regulations are having on the ability to provide certain products and services, and their disproportional impact on small credit unions, which are experiencing accelerated consolidation relative to larger credit unions.

I was concerned that in your response you did not fully understand the concerns CUNA and credit unions have brought to your attention about regulatory burdens stemming from the Bureau’s rulemakings. As we discussed last month when you met with credit unions at our Governmental Affairs Conference, CUNA and its member credit unions have taken the time over the last year to engage with a third-party to try to quantify the cost of regulations on credit unions and their members. We extended an invitation to your staff to receive a briefing on this research. We believe that if you and your staff see and fully understand the data we have compiled, that you will better grasp credit unions’ concerns with the recent direction of the CFPB. As such, we renew our invitation to brief you or your staff on this research.

The study1, conducted by Cornerstone Advisors, shows that the financial impact of regulation on credit unions has increased by 40 percent since 2010 not even counting the effect of asset growth. For smaller credit unions—the three quarters of credit unions with assets below $100 million—regulatory costs rose from 0.78% of assets in 2010 to 1.12% of assets in 2014, an increase of 43%. Regulatory costs now account for 30% of total operating expenses at smaller credit unions, and almost 10% of total operating expenses at these credit unions in 2014 were new regulatory expenses, added since 2010. For credit unions with assets between $10 million and $1 billion, the increase in regulatory expenses was 40%, and 28% at credit unions with over $1 billion in assets. These increases come on top of the already considerable regulatory burden credit unions faced prior to 2010.

This comprehensive research should not be ignored by lawmakers and regulators, because it describes the troubling effect of regulations on credit unions and their members, whom now find access to safe and affordable financial services from their credit union more expensive and less available. At the very least, we hope you would acknowledge that there is more happening in the market than what can been seen when looking at the topline data.

The Consumer Financial Protection Bureau Should Be Very Concerned with the Rate and Causes of Small Credit Union Attrition

At our conference last month, you expressed your opinion that the current regulatory environment is “good news” for credit unions because the topline data shows that overall lending and membership have grown. Additionally, at the hearing this week you stated that, “credit unions are doing better in a marketplace that rewards responsible lenders.” I truly wish this was the reality, but unfortunately, it is not.

While large credit union growth is reflected in the overall numbers, a deeper, more comprehensive analysis shows that the numbers at first glance mask a troubling trend for smaller credit unions. While the number of credit unions has been declining since 1970, the attrition rate has accelerated since 2010, after the Great Recession and the creation of the CFPB. Indeed, the last two years, 2014 and 2015, are among the top five in terms of attrition rates since 1970, at 4.2% and 4.1%. Attrition rates at smaller credit unions have been especially high. In both 2014 and 2015, the attrition rate at credit unions with less than $25 million in assets (half of all credit unions are of this size) has exceeded 6%. There is an indisputable connection between both the dramatically higher regulatory costs incurred by small credit unions and the increases in those costs since 2010, and their higher attrition rates.

At our conference, you publicly stated you understand that, “credit unions provide enormous value to millions of people around the country and are consistent stewards of consumer interests.” It follows then that you understand when small credit unions close, or are forced to stop offering products and services because of the costs of regulation, consumers are the ones that lose because they have fewer choices and less access to credit options. This is particularly problematic for consumers when their local small credit union in a rural or underserved area is forced to consolidate or close. The CFPB, as a consumer protection agency, should take much more seriously this disturbing trend and its effect on the livelihood of consumers, particularly those living in rural and underserved areas with fewer financial services options.

The Authority Congress Conveyed in Section 1022 is Crystal Clear

In your testimony, you also indicated that CUNA sought a blanket exemption during consideration of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) for credit unions, and that Congress considered such a proposal and rejected it. I want to bring to your attention that this statement is not accurate. First, CUNA never pushed for such a blanket exemption during consideration of the Dodd- Frank Act because we have always understood that some authority would write consumer protection regulations for credit unions. Second, to our knowledge and in accordance with the public record, there was no such amendment or legislative proposal to provide for a credit union blanket exemption from consumer protection law generally or the regulatory authority of the Bureau specifically. No Member of Congress offered it; therefore, it would have been impossible for Congress to reject something that was never proposed.

Instead, during consideration of the Dodd-Frank Act, we sought and Congress provided the Section 1022 authority, which was intended to enable the Bureau to focus its regulations on bad actors and not credit unions. We believe this section of the law gives the Bureau the very significant authority to say, “The credit unions are doing things the right way so we are not going to change the rules for them.” That is what we sought then and seek today.

As noted, a super-majority of the House of Representatives – indeed majorities of both the Republican Conference and the Democratic Caucus – sent you a letter reminding you that Congress, “intentionally provided for regulatory flexibility to mitigate collateral damage on smaller financial institutions.” Not only have the majority of Members of the House said they interpret the statute to allow flexibility for exempting credit unions from certain rules, but many of them were there for the drafting of the Dodd-Frank Act and took part in the discussions surrounding its passage – and disagree with the CFPB’s account of what the Congressional intent was.

Notwithstanding all of this history, and any other debate over the legislative history of the Dodd-Frank Act, statutory construction holds that if a statute is plain on its face it should be interpreted using the ordinary meaning of the words. The language in Section 1022 of the Dodd-Frank Act is crystal clear on its face, as well as the plain meaning of the words found in it. As such, all other debate on this is superfluous.

We understand the importance of regulations to implement law. However, if a regulation results in credit unions – which you have acknowledged are not the problem – providing fewer safe and affordable financial services to their members, then why not tailor the rules to avoid this result, particularly in light of the authority and direction Congress has given the Bureau concerning exemption authority? Again, we are not asking for “no regulation;” we are heavily regulated, and are simply asking for the ability to continue to serve our members in the consumer friendly way we always have. We believe this is achievable using the exemption authority Congress has conveyed and encouraged the Bureau to use.

Credit Unions Provide the Most Consumer Friendly Options for Small-Dollar Loan Products

Lastly, I wanted to express my appreciation for your remarks that the CFPB is trying to make sure there are ample avenues that remain for small-dollar lending to be available to consumers. Specifically, I would like to commend your recognition that credit unions have products worth protecting, and that it is important not to squash innovation in this area. I am hopeful that the CFPB’s forthcoming rulemaking in this market aligns with these statements, and that both state and federally chartered credit unions do not face any additional regulatory hurdles when working to serve their members in need of these products.

As always, we welcome the opportunity to discuss these matters further with you and your colleagues. In particular, we welcome the opportunity to speak with you and your staff to brief you on the recent data we have collected regarding the regulatory burden on credit unions. Such a briefing may bring more appreciation for our concerns. Additionally, we renew our invitation to you to spend a day with a credit union to better understand their compliance burdens and how CFPB rules impact day-to-day operations, as well as members.

On behalf of America’s credit unions and their more than 100 million consumer and small business members, thank you for your attention to these crucially important matters. We look forward to working with you in the future.


Jim Tussle, President & CEO

1 Hui, V., Myers, R., Seymour, K, “Regulatory Financial Impact Study.” Cornerstone Advisors, Inc., available at (Feb. 2016).

About CUNA

Credit Union National Association (CUNA) is the only national association that advocates on behalf of all of America’s credit unions, which are owned by 135 million consumer members. CUNA, along with its network of affiliated state credit union leagues, delivers unwavering advocacy, continuous professional growth and operational confidence to protect the best interests of all credit unions. For more information about CUNA, visit To find your nearest credit union, visit


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