What We Recommend
Perspectives on the Financial CHOICE Act
Provisions America’s Credit Unions Strongly Support
CFPB Structural Reform is Necessary to Ensure Consumers Continue to Have Access to Local Credit Unions and Small Banks: One-size-fits-all regulation does not work for main street – local credit unions, small banks, and the consumers and small businesses they serve. It’s created a rigged system favoring the largest institutions who can afford to comply with Washington. Over regulation is hurting consumers, costing them time and money. Local member-owned credit unions know their members better than Washington. Now is the time to reform the CFPB so that it works for credit union members
CFPB Five-Person Commission: The current structure – with one powerful director – gives too much authority to one person and not enough oversight and accountability. Modernizing the CFPB to include a multi-member Commission would enhance consumer protection by ensuring that diverse perspectives are included in final rules and prevents disruptions caused by personnel changes. Credit union members will benefit from policymaking that includes more voices. Frankly, such a system is much more consistent with the traditions of our democracy.
CFPB Funding Through Appropriations: CFPB’s current funding scheme takes the power out of the hands of consumers’ elected representatives, does not do enough to force the CFPB to prioritize resources and fails to ensure appropriate oversight. Instead of targeting abusers of consumers, the result has been rules that impact local credit unions and small banks. Funding the CFPB through appropriations means that taxpayers through their elected representatives have a voice in the priorities of the CFPB. Credit union members will benefit from a Bureau that is going after the bad guys and subject to direct oversight and funding by representatives they elect to Congress.
Increase CFPB Supervisory Threshold: Congress should do more to ensure that the CFPB focuses on abusers of consumers. Local credit unions and small banks do not present significant risk to consumers and have federal prudential regulators capable of supervising compliance with consumer protection law. Increasing the supervisory threshold to $50 billion and indexing it for inflation will allow CFPB to focus supervisory resources on large Wall Street banks and nonbank financial services providers which present the greatest risk to consumers.
Durbin Amendment Repeal: The Durbin Amendment forcing a rate cap on debit interchange has not worked for consumers. Retailers promised to pass along $36 billion in savings to consumers but study after study show the Durbin amendment has been a windfall for retailers and an empty promise for consumers. Repealing the amendment will benefit consumers.
General Regulatory Relief: Congress should have oversight of agency rulemaking for regulations with an economic impact of $100 million or greater and should also provide protection to credit unions for good faith reporting of suspected financial elder abuse. Credit unions also support Title I, which would provide regulatory relief for very well capitalized credit unions. And, we support additional provisions aimed at providing regulatory relief including the provisions addressing the CFPB’s rulemakings on arbitration, payday lending, HMDA, remittances, mortgage lending and other rules that stand between local credit unions and their members.
Additional Suggestions for the CHOICE Act
Clarify CFPB Exemption Authority: The CFPB has statutory authority to exempt local member-owned credit unions from its rulemaking, and its failure to use this authority has harmed consumers seeking safe financial services, including remittances and mortgages, from credit unions, by making these services more expensive and less available. Congress should enact legislation to clarify that credit unions are exempt from CFPB rules unless the CFPB demonstrates credit unions are causing consumer harm.
Address CFPB’s Abuse of UDAAP Authority: Through its use of its Unfair, Deceptive, and Abusive Actions and Practices (UDAAP) authority, the CFPB has failed consumers by ignoring basic tenets of the rule of law. Regulations should be clear, publicized, stable and just, but the CFPB has used this authority as a broad tool to sweep credit unions into proposed regulations consistent with its ideological goals, despite no evidence of harm to consumers. In their supervisory role, they have used this authority to set expectations that conflict with longstanding guidance from prudential regulators. Through these actions, CFPB circumvents the will of Congress and harms consumers by creating an uncertain operating environment for credit unions serving them. Congress should repeal the CFPB’s UDAAP authority.
Duplex and Quadplex Lending Parity: The renter population in the United States is increasing, creating a considerable gap in rental supply and demand and putting affordable rental housing out of reach for many. Credit unions face statutory barriers to helping finance small rental housing because the Federal Credit Union Act treats loans for 1-4 family non-occupied residential properties as commercial loans, but similar loans made by banks are considered residential loans. Congress should correct this disparity and encourage credit unions to help with the affordable rental housing crisis.
Provisions that Cause America’s Credit Unions Concern
NCUA Funding Subject to Appropriations: Credit union member deposits fund NCUA. These resources should not be commingled with Treasury funds. While we have concerns about the NCUA budget, NCUA is the appropriate body to determine the resources needed to keep the credit union system safe and sound. Congress can help by ensuring that the NCUA budget process remains transparent and responsive to stakeholder concern.
Expanded Powers for Savings and Loans: Without question, small business lending demand exists. Local member-owned credit unions stand ready and willing to help meet this demand in their communities; they have the capital and the experience to do so. However, it makes no sense to permit Savings and Loan Associations – institutions chartered for the purpose of making home loans and with a history of causing taxpayers considerable financial trouble – to do more of this lending without also permitting local-member owned credit unions to also help America’s small businesses. While we oppose the provision expanding the business lending powers of Savings and Loan Associations, we would support it if the similar statutory cap on credit union member business lending were eliminated.