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NAFCU statement on House Financial Services Committee Chairman Jeb Hensarling’s alternative plan to Dodd-Frank, “The Financial Choice Act”

WASHINGTON, DC (June 7, 2016) — National Association of Federal Credit Unions (NAFCU) President and CEO Dan Berger issued the following statement in response to House Financial Services Committee Chairman Jeb Hensarling’s (R-Texas) alternative plan to the Dodd-Frank Act: The “Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act.” He unveiled the plan, which included the return to an extended 18-month exam cycle for certain credit unions and also repeal the “federal price controls” in the Durbin amendment, changes that NAFCU has championed, in a speech at the Economic Club of New York.

“NAFCU and our members greatly appreciate Chairman Hensarling’s thoughtful leadership in creating a plan to correct a regulatory pendulum that has swung too far,” said Berger. “Lawmakers and regulators have widely recognized credit unions for their prudent business model and for not creating the crisis. Hensarling’s plan addresses a number of issues of great concern to credit unions. Specifically, we appreciate that his plan would repeal the federal price caps within the Durbin amendment. We expect a number of other NAFCU-backed regulatory relief measures to be included in the larger package, including requirements for regulators to better tailor rules to different sizes and types of institutions. We look forward to seeing the plan in greater detail.”

In his released prepared remarks, Hensarling said his bill will “provide much-needed relief to community financial institutions that are being crushed by Washington’s ‘one-size-fits-all’ regulatory approach.” The bill also includes measures that would allow credit unions to appeal exam findings more easily.

“We are losing, on average, one community financial institution each day – and they are not dying from natural causes but from the sheer weight, volume, complexity and expense of Washington’s rules,” Hensarling said in his prepared remarks. “So our plan requires financial regulators to tailor regulations so they fit a bank or credit union’s business model and risk profile. This allows America’s small, hometown banks and credit unions to focus their time and resources on serving their customers rather than the dictates of Washington bureaucrats.

“Our plan provides for the timely release of exam reports, creates a mechanism for institutions to appeal exam findings without fear of bureaucratic retaliation, and creates an extended 18-month exam cycle for certain credit unions. We permit small institutions to more easily finance acquisitions and allow well-capitalized community institutions to file short-form call reports in the first and third quarters of each year,” he continued.

NAFCU has long urged NCUA to return healthy credit unions to a longer exam cycle, both to save NCUA resources and to relieve credit unions of the burden of more-frequent exams. Credit unions are the only federally regulated depository institutions currently without an extended cycle for examinations. NAFCU also worked with Reps. Frank Guinta, R-N.H., and Rubén Hinojosa, D-Texas, to send a bipartisan congressional letter to NCUA earlier this year urging this change.

Hensarling also outlined an ability-to-repay safe harbor for loans held on portfolio, a measure that would ensure credit for manufactured-home mortgages, reforms to how points and fees are calculated and relief for small servicers from escrow requirements. Hensarling said his financial reform bill would also make changes to CFPB’s structure, revoke regulators’ power to designate companies as “systematically important” and remove the Volcker Rule. The Volcker Rule limits the ability of financial institutions to grow their non-deposit liabilities and places restrictions on investment-trading activities.

In addition, the bill Hensarling outlined today would also strengthen the regulatory review process and create new transparency measures for regulators of financial institutions.

To Hensarling’s point, Berger noted that since the implementation of the Dodd-Frank Act, we have lost 1,280 federally-insured credit unions – more than 17 percent of the industry since the second quarter of 2010. In fact, based on 1st Quarter figures, we are losing nearly a credit union each business day. The number of federally insured credit unions declined by 252 during the past 12 months.

NAFCU has staunchly opposed the Durbin amendment because the cap on interchange fees results in profits for retailers but no passed-on savings for consumers. The amendment required the Federal Reserve to set a cap on debit interchange fees charged by financial institutions with $10 billion or more in assets. The Fed’s final rule caps debit interchange transaction fees at 21 cents plus 1 basis point for fraud costs.

NAFCU was the only credit union trade association to oppose subjecting credit unions to the Consumer Financial Protection Bureau (CFPB) authority under Dodd-Frank. The association maintains that CFPB has the authority – and should be using that authority – to exempt credit unions from regulations aimed at bad actors.


About NAFCU

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.

Contacts

Molly Safreed, msafreed@nafcu.org (NAFCU)

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