NAFCU letter in advance of CFPB’s semi-annual report to Congress

WASHINGTON, DC (September 28, 2015) —  

The Honorable Jeb Hensarling
House Financial Services Committee
United States House of Represntatives
Washington, DC 20515

Maxine Waters
Ranking Member
House Financial Services Committee
United States House of Represntatives
Washington, DC 20515

Re:       Tomorrow’s hearing to receive the CFPB semi-annual report

Dear Chairman Hensarling and Ranking Member Waters:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association exclusively representing the federal interests of our nation’s federally-insured credit unions, I write today in conjunction with Tuesday’s hearing to receive the Consumer Financial Protection Bureau’s (CFPB) semi-annual report to Congress. NAFCU urges the Committee to press the CFPB to provide greater relief to credit unions and to act on legislation pending in Congress to provide credit unions with regulatory relief and improve the governing structure and processes of the CFPB.

During the consideration of financial reform, NAFCU was concerned about the possibility of overregulation of good actors such as credit unions, and this is why NAFCU was the only credit union trade association to oppose the CFPB having authority over credit unions. Unfortunately, many of our concerns about the increased regulatory burdens that credit unions would face under the CFPB have proven true. While there are credible arguments to be made for the existence of the CFPB, its primary focus should be on regulating the unregulated bad actors, not adding new regulatory burdens to good actors, like credit unions, that already fall under a prudential regulator. As expected, the breadth and pace of the CFPB’s rulemaking is troublesome, and the unprecedented new compliance burden placed on credit unions has been immense.

While it is true that credit unions under $10 billion are exempt from examination and enforcement from the CFPB, all credit unions are subject to the rulemakings of the agency. NAFCU members are feeling this burden.  While the CFPB has the authority to exempt certain institutions, such as credit unions, from agency rules, they have been reluctant to use this authority in a broad way to provide relief.

The impact of this growing compliance burden is evident as the number of credit unions continues to decline.  Since the second quarter of 2010, we have lost 1,280 federally-insured credit unions – over 17% of the industry. The overwhelming majority of these were smaller institutions below $100 million in assets. While it is true that there has been a historical consolidation trend in the industry, the passage of the Dodd-Frank Act has served to accelerate this trend. The percentage of credit unions disappearing annually rose from a 3.4% average in the ten years prior to Dodd-Frank to an average annual disappearance rate of 3.9% in the years after Dodd-Frank. The fact is that many smaller institutions simply cannot keep up with the new regulatory tide and have had to merge out of business or be taken over.

One way that the CFPB can provide relief to credit unions is by using its broad legal authority to exempt credit unions from various rulemakings. Given the unique member-owner nature of credit unions and the fact that credit unions did not participate in many of the questionable practices that led to the financial crisis, subjecting credit unions to rules aimed at large bad actors only hampers their ability to serve their members. While some the rules of the CFPB may be well-intentioned, many credit unions do not have the economies of scale that large for-profit institutions have and may end a product line or service rather than face the hurdles of complying with new regulation. While the CFPB has taken some steps in this regard, such as their small creditor exemption, NAFCU has long urged that more needs to be done to exempt all credit unions from burdensome rulemakings.

The CFPB can also help by improving the guidance it gives with its rulemakings. In attempting to understand ambiguous sections of CFPB rules, NAFCU and many of its members have reached out to the CFPB to obtain legal opinion letters (written guidance) as to the agency’s interpretation if its regulations. Many other financial agencies, including the National Credit Union Administration (NCUA), issue legal opinion letters to help institutions understand otherwise ambiguously written rules. The CFPB has declined to do so. What they have done is set up a “help line” where financial institutions can call for oral guidance from the agency. While this is helpful, there are reports of conflicting guidance being given depending on who answers the phone. This is not just unhelpful, but can be confusing when NCUA examines credit unions for compliance with CFPB regulations. NAFCU would appreciate the CFPB establishing procedures for institutions to get much needed official written legal advisory opinions to provide clearer guidance. Setting up such a process within the CFPB would be beneficial to credit unions and other financial institutions.

Some other CFPB issues NAFCU is monitoring include:

TRID Implementation: Credit unions worked diligently for nearly two years to implement the TILA/RESPA integrated disclosures rule, at a significant cost of both staffing and resources. NAFCU appreciates that the CFPB is working to resolve any unintended consequences of its final regulation, including extending the implementation date from August 1, 2015 to October 3, 2015. Still, NAFCU would like to see passage of H.R. 3192, to further extend the safe harbor period so that credit unions and other financial institutions have time to fully comply with the new rules. Additionally, while NCUA Chairman Debbie Matz has indicated that the agency will recognize “good faith” efforts at compliance, NAFCU believes the CFPB must actively and transparently coordinate with NCUA, as the agency will be the primary entity conducting most of the credit union examinations on this rule.

Overdraft: Credit unions have an established history of member satisfaction with their overdraft programs, yet these programs could be curtailed by a potential rulemaking from the CFPB.  For the past two years, the CFPB has listed overdraft on its rulemaking agenda. However, the timeframe for its release continues to be pushed back because the CFPB lacks the statutory authority to set a hard cap on overdraft fees, and there is a lack of consumer support for curtailing overdraft programs. NAFCU believes that the CFPB should carefully consider the long-term implications of any changes to overdraft protection regulations, especially since consumers may end up actually paying more fees, such as NSF fees for checks. Further, credit unions need the flexibility to tailor their programs as necessary, as there is no one-size-fits-all approach.

HMDA: The CFPB is poised to finalize several substantive changes to HMDA (Regulation C), including, (1) requiring credit unions to report additional data points, (2) making HELOC reporting mandatory, and (3) changing the coverage test so credit unions that originated 25 covered loans or less, excluding open-end lines of credit, in the previous calendar year would be exempt from HMDA reporting requirements. NAFCU strongly supports HMDA’s goal of ensuring fair lending and anti-discriminatory practices, but is concerned that many aspects of the proposal may not further this goal and may only serve to impose significant additional compliance and reporting burdens. Given the tremendous burden that these changes will place on credit unions, NAFCU believes that the Bureau has failed to provide compelling reasons how the collection of the additional data ensures fair access to credit in the housing market.

Finally, we believe that one way to improve the CFPB would be to enact H.R.1266, the Financial Product Safety Commission Act of 2015. This legislation would change the leadership structure from a single director to a five member commission appointed by the President.  NAFCU has long held the position that, given the broad authority and awesome responsibility vested in the CFPB, a five person commission has distinct consumer benefits over a single director. Regardless of how qualified one person may be, a commission would allow multiple perspectives and robust discussions of consumer protection issues throughout the decision making process. Credit unions and their 101 million members are greatly impacted by the actions of the CFPB and believe the operating structure of the CFPB should be as fair and transparent as possible. We are pleased that the Committee has scheduled a mark-up of this legislation.

NAFCU looks forward to working with the Committee to improve the CFPB and provide regulatory relief to credit unions. We hope that you will use this week’s hearing to push the CFPB to take greater steps to provide relief to credit unions under its current authority. We thank you for the opportunity to share our thoughts with you today. If you have any questions, or if my colleagues or I can be of assistance in any way, please do not hesitate to contact me or NAFCU’s Director of Legislative Affairs, Jillian Pevo, at (703) 842-2836.


Brad Thaler

Vice President of Legislative Affairs

cc:        Members of the House Financial Services Committee


The National Association of Federally-Insured Credit Unions is the only national trade association focusing exclusively on federal issues affecting the nation’s federally-insured credit unions. NAFCU membership is direct and provides credit unions with the best in federal advocacy, education and compliance assistance. For more information on NAFCU, go to or @NAFCU on Twitter.


Molly Safreed, (NAFCU)

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