NAFCU to Senate Banking: Credit unions need regulatory relief even more in 2015

WASHINGTON, DC (February 12 , 2015) — National Association of Federal Credit Union’s (NAFCU) chair and the president and CEO of SRP Federal Credit Union Ed Templeton will testify today on behalf of the association before a Senate Banking Committee hearing on regulatory relief. Templeton is telling lawmakers that “the need for regulatory relief is even stronger in 2015” and seeking action to reduce the onslaught of new rules from the National Credit Union Administration (NCUA), the Consumer Financial Protection Bureau (CFPB) and other regulatory agencies.

Templeton, whose credit union is headquartered in North Augusta, S.C., is testifying before the committee in today’s hearing, “Regulatory Relief for Community Banks and Credit Unions,” which began at 10 a.m. Eastern.

Credit Unions’ Increasing Burden Under Dodd-Frank Act

Templeton, in his written testimony, emphasizes that credit unions have a long history of helping the economy grow, even during the recent financial crisis, but remain highly regulated and face restrictions on whom they can serve and their ability to raise capital. He highlights a 2012 NAFCU survey of the association’s members that found 94 percent of respondents had seen their compliance burdens increase since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.

Templeton says 1,100 federally insured credit unions have gone out of existence since the second quarter of 2010; of those, 96 percent were smaller institutions having less than $100 million in assets. “While NAFCU and its member credit unions take safety and soundness extremely seriously, the regulatory pendulum post-crisis has swung too far toward an environment of overregulation that threatens to stifle economic growth,” his testimony says.

NAFCU 2015 Plan for Regulatory Relief

NAFCU has released a revised version of its original five-point plan for regulatory relief for credit unions. In addition, the association has updated its “Dirty Dozen” list of rules it would like to see amended or eliminated. “While some slight progress was made on several of these recommendations, we have updated that list for 2015 to outline the “Top Ten” regulations that regulators can and should act on now to provide relief,” Templeton says.

NCUA’s Second Risk-Based Capital Proposal Still Poses Concerns

Templeton’s testimony also highlights many key issues where regulatory burdens and proposals are threatening SRP FCU’s and credit unions’ ability to provide members with the services they need and want. Often, risk is overestimated, and this usually results in a rule that creates more problems than solutions. An example is NCUA’s revised risk-based capital proposal.

Templeton reiterates NAFCU’s stance that this proposal is unnecessary and will unduly 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 this testimony.

Updates Needed to Field of Membership (FOM) Rules

Templeton says field of membership (FOM) rules need to be updated by statute but that some changes could be made now by NCUA.

“NAFCU believes reasonable improvements to current field-of-membership restrictions should include streamlining the process for converting from one charter type to another, updating and revising population limits in NCUA’s field of membership rules, and making statutory changes to make it easier for all credit unions to add underserved’ areas within their field of membership or continuing serving their current select employee groups (SEGs) when they change charters,” he states.

He also says NCUA should have “reverse wild card” authority so federal credit unions can request a waiver from the agency so they may follow a state rule if it would serve their members more efficiently.

Improvements to CFPB Rules

Templeton discusses unintended consequences in the lending market of the Consumer Financial Protection Bureau’s (CFPB) new regulations. “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.

Templeton suggests CFPB use its legal authority to exempt credit unions from various rulemakings; encourages the bureau to 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) dataset to those mandated by Dodd-Frank; and make improvements to the integrated disclosures rule under the Truth in Lending Act and Real Estate Settlement Procedures Act (TILA/RESPA) and the Qualified Mortgage (QM) standard.

NAFCU Supports Regulatory Relief Bills

Templeton’s testimony urges support for a number of legislative measures that were introduced in either the House or Senate in the 113th Congress, including:

  • H.R. 2572, the “Regulatory Relief for Credit Unions Act of 2013”;
  • S. 968, the “Small Business Lending Enhancement Act of 2013” and H.R. 688, the “Credit Union Small Business Jobs Creation Act”;
  • H.R. 719, the “Capital Access for Small Businesses and Jobs Act”;
  • S.1577, the “Mortgage Choice Act”;
  • S. 423, the “Privacy Notice Modernization Act of 2015”;
  • S.727/H.R. 1533, the “Financial Institutions Examination Fairness and Reform Act”;
  • S. 2732, the “CFPB Examination and Reporting Threshold Act”;
  • H.R. 4986, the “End Operation Choke Point Act”;
  • S. 1916/H.R. 2672, the “Helping Expand Lending Practices in Rural Communities Act”;
  • H.R. 4042, the “Community Bank Mortgage Servicing Asset Capital Requirements Study Act”; and
  • H.R. 4626, the “S.A.F.E Mortgage Licensing Act.”

In closing, Templeton says “NAFCU appreciates the Committee holding this hearing today… Moving forward, we would urge the Committee to act on credit union relief measures pending before the Senate 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.” Templeton also thanks the committee and its staff for their work leading to final passage of H.R. 3468, the “Credit Union Share Insurance Fund Parity Act” in the last Congress.

The National Association of Federal Credit Unions is the only national trade association that exclusively represents the interests of federally chartered credit unions before the federal government and the public.

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