Regulations push America’s credit unions to the brink

In addition to the woodland caribou, the bighorn sheep, and the masked bobwhite, you can add this to America’s list of endangered species: the small credit union.

Chalk up that threat to the same culprit: Humans. In this case, it’s death by a thousand paper cuts from Washington legislators and regulators who have been carving up small financial institutions with compliance costs since the Great Recession. Worse, the prognosis in the Capitol is for more of the same bad medicine.

America’s credit unions were not the cause of the financial crisis. On the contrary, our not-for-profit, member-owned, cooperative business model guides us to serve our members with attractive rates on savings, loans and credit cards rather than piling on risk to please shareholders with a higher dividend or rising stock price on Wall Street.

Yet, since passage of Dodd-Frank in 2010, which led to the creation of the Consumer Financial Protection Bureau (CFPB), regulatory costs for credit unions have risen by 39 percent. While this hits all of America’s credit unions regardless of size and impacts the financial benefits they extend to members, it hammers small credit unions and the communities they serve particularly hard. That’s because smaller financial institutions lack the scale to spread their regulatory costs across a larger base. Typically, they’re forced to dig out from the regulatory blizzard by adding costly staff or reducing services that benefit their members. And by comparison, even the largest credit unions are small when compared to the trillion-dollar mega banks that destroyed the American economy in the financial crisis.

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