NAFCU letter to President Obama ahead of the upcoming SOTU Address
WASHINGTON, DC (January 7, 2016) — January 6, 2016
The Honorable Barack H. Obama
President of the United States
The White House
1600 Pennsylvania Avenue NW
Washington, D.C. 20500
Dear Mr. President:
On behalf of the National Association of Federal Credit Unions (NAFCU), the only national trade association exclusively representing the interests of our nation’s federally-insured credit unions, I write today to urge you to support national data security standards and regulatory relief for community financial institutions.
As you prepare to deliver the State of the Union address next week to outline your priorities for this year, we ask that you consider some major issues facing the credit union industry, which provides more than 101 million Americans with safe and reliable financial services. We also hope that you will recognize and mention in your address the good work that credit unions are doing to meet the financial service needs of Americans.
Data breaches have become a constant concern of the American people. Major data breaches now occur with an unacceptable level of regularity. From breaches at Target and Home Depot that impacted over 110 million consumer records and 56 million payment cards respectively, to breaches at Anthem and Experian that exposed consumer records of 80 million and 15 million Americans respectively, the concerns of American consumers are well founded. A Gallup poll from October 7-11, 2015, found for the second consecutive year, that 69 percent of U.S. adults are frequently or occasionally concerned about having their credit card information stolen by hackers. These staggering survey results speak for themselves and should demonstrate the need for greater national attention to this issue.
We applaud you and your Administration for your leadership and actions on the cybersecurity and data security front. While these have been positive steps forward, more needs to be done and legislative action is needed. Americans’ sensitive financial and personally identifiable information will only be as safe as the weakest link in the security chain. While financial institutions, including credit unions, have been subject to federal standards on data security since the passage of the Gramm-Leach-Bliley Act (GLBA), retailers and many other entities that handle sensitive personal financial data are not subject to these same standards. Consequently, they have become the vulnerable targets of choice for cybercriminals.
Credit unions suffer steep losses in re-establishing member safety after a data breach occurs. They are often forced to absorb fraud-related losses, many of which stem from a negligent entity’s failure to protect sensitive financial and personal information in their systems. As not-for-profit cooperatives, credit union members are the ones that are ultimately impacted by these costs.
It is with this in mind that NAFCU urges you to support common sense bipartisan legislation to create national data security standards such as the Data Security Act of 2015. Introduced by Representatives Randy Neugebauer and John Carney as H.R. 2205 in the House, this legislation received strong bipartisan support in a House Financial Services Committee mark-up in December. Similar legislation has been introduced by Senators Roy Blunt and Tom Carper as S. 961 in the Senate. The Data Security Act of 2015 would create flexible requirements that while protecting consumers’ data in the current environment, would also allow for and encourage innovation to protect consumers from future threats we have not yet anticipated. Additionally, the national standards created would be scalable to allow for compliance by entities of all sizes. Just as the GLBA institutes requirements that are appropriate for both the smallest credit unions and the biggest banks, this legislation would allow for appropriate standards for the smallest corner store to the largest retailers.
While it is universally accepted that community financial institutions such as credit unions did not cause the economic crisis, credit unions have still been overwhelmed by the constant wave of regulatory burden they have faced since the passage of the Dodd-Frank Act.
Credit unions have always served as a safe haven for consumers during times of economic difficulty. This was certainly the case during the economic crisis. While other lenders pulled back on their lending, credit unions were still extending credit to consumers, in many cases increasing their lending. However, their capacity to serve as a vital resource of financial services to those of modest means, as is their mission, is being curtailed because of regulatory burden. With every additional regulation, credit unions are forced to place more emphasis on compliance and less on providing needed financial services to their members.
The impact of the compliance burden, in particular the growth of CFPB rulemaking, is evident as the number of credit unions continues to decline, dropping by more than 17% (more than 1,280 institutions) since the second quarter of 2010; 96% of which were smaller institutions with assets of less than $100 million. One reason for the decline is the increasing cost and complexity of complying with the ever-increasing onslaught of regulations.
Unfortunately, there is no single regulation that is the source of difficulty. It is with this in mind that we urge you to support comprehensive regulatory relief for credit unions both on the legislative and regulatory fronts. In 2015, NAFCU released an updated five-point plan for credit union regulatory relief and I have attached a copy to this letter. We hope you can support us in these efforts.
On behalf of our nation’s credit unions and their more than 101 million members, we thank you for your attention to this important matter. If my staff or I can be of assistance to you, or if you have any questions regarding these issues, please feel free to contact myself, or NAFCU’s Vice President of Legislative Affairs, Brad Thaler, at (703) 842-2204.
B. Dan Berger
President and CEO
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 www.nafcu.org or @NAFCU on Twitter.