While the trade groups troupe to Capitol Hill to once again plead the case for regulatory relief, it’s death by a thousand paper cuts that one credit union attorney cites as his big fear.
It’s been about a year since Steve Van Beek left his job as vice president of regulatory compliance at NAFCU to practice law from his home base in suburban Detroit. Now working in the trenches to help credit unions navigate the regulatory burden, he still keeps an eye on doings in DC but says he also has gained a new perspective.
Over the past year, credit unions have faced continually growing pressure on the compliance front, he says, and staff were pushed very hard to implement and comply with the overlapping and complex mortgage regulations from the CFPB.
And, there is only 10 months remaining before the CFPB’s new mortgage disclosures must be in place for all credit unions. These changes are in addition to the day-to-day compliance issues and will require teams of credit union staff lending, operations, compliance, and management to implement properly.
Van Beek agrees with the pleas for help put out again Tuesday as the Senate Banking Committee staged a hearing titled Examining the State of Small Depository Institutions.
NAFCU In Opposition
All is not good in the state of credit unions, according to NAFCU, which took issue with NCUA’s prepared testimony on some key points, including what has led to the demise of 1,025 federally insured credit unions in the four or so years since Dodd-Frank and the creation of the Consumer Financial Protection Bureau.
Carrie Hunt, the trade’s chief counsel, says, The extraordinarily challenging regulatory environment has played a significant part in the decline of small credit unions and continues to exacerbate the demands on small credit unions.
NAFCU cites vendor examination authority, mortgage regs, and the latest chief bogeyman risk-based capital rule changes as chief threats.
The trade’s spokesperson for the Sept. 16 testimony Linda McFadden, president and CEO of XCEL Federal Credit Union ($155.4M, Secaucus, NJ) made her feelings clear.
Under the proposed rule, XCEL will be faced with many difficult decisions when attempting to reach the RBC ratios stated. We face the possibility of having to divest ourselves of profitable assets that, under your rule, are more heavily risk weighted in order to generate higher retained earnings your proposal seeks from us, her testimony says.
We feel that in the current economic climate, this would be virtually impossible to accomplish and fulfill our mission of serving our members under the credit union model, McFadden says.
Help From The CFPB?
Now helping to provide counsel to about 50 credit unions his firm serves around the country, Van Beek says while RBC and mortgage regs capture the headlines, he hears a lot about the daily grind.
These are as simple as reviewing advertisements and websites for compliance or more complex issues such as updating remote deposit capture agreements, Van Beek says. These day-to-day operational issues impact every credit union and when new (or changing) regulations from NCUA and the CFPB are added on top it puts pressure on the operation and compliance staff at credit unions.
Even the simple things that everyone agrees on like the Privacy Notice Modernization Act passed by the House languish. Ultimately, I’m not overly optimistic that Congress will make beneficial changes for credit unions, Van Beek says.
Relief on that point, perhaps counterintuitively, may come from the CFPB, in the form of an alternative method for the annual privacy notice. I expect the CFPB to finalize this change later this fall and this would be a big cost savings for credit unions that qualify, Van Beek says. There are numerous opportunities for both the CFPB and NCUA to provide similar relief especially in relation to day-to-day compliance issues.
For instance, he points to NCUA Chairman Debbie Matz’s mention of future changes to agency rules that Van Beek says could make it easier to comply with advertising rules, particularly for online and social media.
These types of regulatory changes while not headline grabbing are the ones, when added together, start to swing the regulatory burden pendulum back in the proper direction for credit unions, Van Beek says.