WASHINGTON, DC (September 17, 2015) — Dixies Federal Credit Union President and CEO Scott Eagerton will testify today on behalf of the National Association of Federal Credit Unions (NAFCU) before a House Small Business Subcommittee hearing on the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on small businesses and financial institutions. Eagerton is telling lawmakers that “the overwhelming tidal wave of new regulations in the wake of the Dodd-Frank Act is having a profound impact on all credit unions and their ability to serve their 101 million member-owners nationwide” and is seeking action from Congress and regulatory agencies to provide relief.
Eagerton, whose credit union is headquartered in Darlington, S.C., is testifying before the House Small Business Subcommittee on Economic Growth, Tax and Capital Access in today’s hearing, “Financing Main Street: How Dodd-Frank is Crippling Small Lenders and Access to Capital,” which began at 1 p.m. Eastern.
Dodd-Frank and Its Impact on Credit Unions
Eagerton, in his written testimony, highlights that credit unions were not the cause of the recent financial crisis but actually helped blunt the crisis by continuing to lend to creditworthy consumers during difficult times. Yet, credit unions remain highly regulated under the rulemaking authority of the Consumer Financial Protection Bureau (CFPB), which was created under the Dodd-Frank Act, and face unnecessary compliance costs.
Eagerton discusses how the passage of the Dodd-Frank Act has led to an increase in his credit union’s compliance costs. “At Dixies FCU, our compliance costs have risen five-fold since 2009, from about $20,000 a year to $100,000 annually,” Eagerton says.
Eagerton talks about the recent five-year anniversary (July 21, 2015) since the passage of the Dodd-Frank Act and the legislation’s impact since then on the credit union industry. While the act was intended to restore the economy, end “too-big-to-fail” and promote financial stability, “we have witnessed large banks grow and small banks and credit unions disappear.”
Growing Regulator Budgets in the Wake of Dodd-Frank
Eagerton also discusses the National Credit Union Administration’s (NCUA) move in 2008 to 12-month exam cycles for credit unions, which continues today. “We believe NCUA should use the authority they already have and return to an 18-month exam cycle for healthy and well-run credit unions,” says Eagerton. “This simple step will help with costs both at the agency and at credit unions and be a step forward to reducing regulatory burden.”
NAFCU’s 2015 Plan for Credit Unions’ Regulatory Relief
With the overwhelming regulatory burdens facing credit unions in the wake of the Dodd-Frank Act and an even stronger need for regulatory relief in 2015, NAFCU released an updated version of its original five-point plan for regulatory relief for credit unions. In addition, the association has updated its initial “Dirty Dozen” list of rules it would like to see amended or eliminated to an outline of the ‘Top Ten‘ regulations that regulators can and should act on now to provide relief.
Regulatory Coordination is Needed
Eagerton also talks about the need for regulatory agencies to coordinate with each other. “With numerous new rulemakings coming from regulators, coordination between the agencies is more important than ever and can help ease burdens,” says Eagerton.
Legislative Changes to Dodd-Frank and CFPB
NAFCU supports measures to bring greater accountability and transparency to CFPB. A key element of this reform would be for Congress to pass the “Financial Product Safety Commission Act of 2015” (H.R. 1266), which would replace the director of the bureau with a bipartisan, five-person commission. “Such a move should help improve CFPB rulemaking by ensuring debate and discussion about proposals that can incorporate multiple viewpoints,” Eagerton says.
Regulatory Improvements to CFPB Rules
Eagerton discusses how new regulations from CFPB have had unintended consequences in the lending market. “In particular, the ability-to-repay, qualified mortgage and mortgage servicing rules have required credit unions of various sizes and complexities to make major investments, and incur significant expenses,” he says in his testimony.
Eagerton recommends that CFPB use its legal authority to exempt credit unions from various rulemakings; amend Regulation E to allow financial institutions to truncate account numbers on periodic statements; expand the threshold for the safe harbor from the definition of “remittance transfer provider” to ensure that a meaningful safe harbor is established; limit the changes to the Home Mortgage Disclosure Act (HMDA) data set to information mandated by the Dodd-Frank Act; and make improvements to the integrated disclosures rule under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) and the Qualified Mortgage (QM) standard.
NCUA’s Second Risk-Based Capital Proposal: A Solution in Search of a Problem
Eagerton’s testimony also highlights NCUA’s revised risk-based capital proposal and discusses NAFCU’s unwavering position that the agency’s proposal is unnecessary and will overly burden credit unions and the communities they serve.
“NAFCU’s analysis estimates that credit unions’ capital cushions (a practice encouraged by NCUA’s own examiners) will suffer over a $470 million hit if NCUA promulgates separate risk-based capital thresholds for well-capitalized and adequately capitalized credit unions (a ‘two-tier’ approach),” he says in his testimony.
Eagerton’s testimony urges Congress to support the “Risk-Based Capital Study Act of 2015” (H.R. 2769), introduced by Reps. Stephen Fincher, R-Tenn., Denny Heck, D-Wash., and Bill Posey, R-Fla. “This NAFCU-backed legislation will stop NCUA from moving forward with their second risk-based capital proposal until completing and delivering to Congress a thorough study addressing NCUA’s legal authority, the proposal’s impact on credit union lending, capital requirements for credit unions compared to other financial institutions, and more,” says Eagerton.
In closing, Eagerton says, “We would urge members to support credit union relief measures pending before the House and the additional issues outlined in NAFCU’s Five-Point Plan for Credit Union Regulatory Relief and NAFCU’s “Top Ten” list of regulations to review and amend.”
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.
