XCEL Federal Credit Union President and CEO Linda McFadden will tell the Senate Banking Committee on Tuesday that “enough is enough” when it comes to the overregulation of credit unions, sources in Washington tell HousingWire.
McFadden, speaking on behalf of the National Association of Federal Credit Unions, will ask legislators to curb the copious amount of new burdensome rules from the National Credit Union Administration and the Consumer Financial Protection Bureau.
McFadden, whose credit union is headquartered in Bloomfield, N.J., is testifying before the committee in Tuesday’s hearing.
McFadden, in her written testimony, emphasizes that credit unions didn’t cause the recent financial crisis but still remain highly regulated, facing restrictions on whom they can serve and how they can raise capital.
“In short, credit unions didn’t cause the financial crisis, they helped blunt the crisis by continuing to lend during difficult times, and perhaps most importantly, continue to play a key role in the still-fragile economic recovery,” her testimony says.
She highlights that “on average from 2005-2013, credit unions consistently outperformed banks with lower interest rates on loans and higher returns on savings and deposits. Today, credit union lending continues to grow at a solid pace, up about 18% in June compared to 2009.”
McFadden says 1,025 federally insured credit unions have gone out of existence since the second quarter of 2010; of those, 96% 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 has swung too far towards an environment of overregulation that threatens to stifle economic growth,” she adds.
McFadden’s testimony also underscores a number of key issues where regulatory burdens and proposals are causing threats to XCEL FCU’s and all credit unions’ ability to provide members services they need and want. Among these is NCUA’s proposal on risk-based capital, which NAFCU has warned is a solution in search of a problem.
“The proposal, as it is written, would negatively impact XCEL FCU, taking us from a well-capitalized credit union to adequately capitalized,” McFadden’s testimony states. “This proposal will be putting restraints on the growth of credit unions and will restrict XCEL from implementing products and programs which are needed to compete in the financial industry.”
NAFCU’s analysis of NCUA’s risk-based capital proposal, which would revise risk weights and increase minimum capital levels for some, shows that credit unions with more than $50 million in assets will have to hold $7.1 billion more in additional reserves to maintain their current capital cushion if the rule were finalized in its current form.
“Simply put, if the NCUA implements this rule as proposed, credit unions will have less capital to loan to creditworthy borrowers, whether for a mortgage, auto, or business loan,” McFadden says in her written testimony.