Putting an end to remarks from the Consumer Financial Protection Bureau that its regulations are, in fact, helping credit unions, the Credit Union National Association published a detailed report that outlines exactly how the new rules have suffocated growth.
CUNA is a national association that advocates on behalf of all of America's credit unions, which are owned by more than 100 million consumer members.
CFPB Director Richard Cordray has commonly gone on record to denounce doomsayers who say that new regulations are killing the banks, especially when it comes to credit unions and community lenders.
In response, CUNA submitted a letter to the CFPB detailing each of the ways the agency’s rulemakings have affected America’s roughly 6,000 credit unions.
The letter also includes recommendations on how the bureau can improve its regulations to provide relief to credit unions and their members.
“We urge the bureau to take immediate action and implement our suggestions for the protection of credit union members, who have fewer choices and are incurring increased costs due to CFPB rules,” said Jim Nussle, CUNA president/CEO. “CUNA, our state league partners, and credit unions—the original consumer protectors—stand willing to provide the CFPB any further details or analysis necessary to achieve regulatory relief, the ultimate goal of our Campaign for Common-Sense Regulation.”
“The CFPB continues to cite the very minimal accommodations it has made in some rules for credit unions,” Nussle explained.
“However, in practicality, credit unions’ ability to provide top-quality and consumer-friendly financial products and services has been significantly impeded by a one-size-fits-all regulatory scheme that favors large banks and less regulated nonbank lenders—institutions that have more resources for overly complex compliance requirements,” he said.
While CUNA is are pleased to hear that the CFPB recognizes the very important role credit unions play in serving consumers, there are still plenty of areas to improve on, which is outlined in the letter and recommendations.
According to CUNA’s Regulatory Burden Study, it found that in 2014, regulatory burden on credit unions caused $6.1 billion in regulatory costs, and an additional $1.1 billion in lost revenue.
And this data doesn’t even include the CFPB’s recent regulatory additions to the Home Mortgage Disclosure Act (HMDA) and Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) requirements.
“The CFPB regularly cites modest thresholds and accommodations it has provided in some mortgage rules and the remittances rule as proof that it is considering the impact its rules have on credit unions and their members,” the letter stated. “Regrettably however, credit unions continue to tell us that the accommodations the CFPB continues to cite are not sufficient exemptions and they do not fully take into consideration the size, complexity, structure, or mission of all credit unions.”
The letter breaks down the following four categories:
1. Ability to Repay/Qualified Mortgage (ATR/QM)
According to a recent survey of CUNA members, 43% cited the QM rule as most negatively impacting the ability to serve members with mortgage products.
So even though the bureau commonly cites the expanded qualified mortgage (QM) safe harbor for small creditors as proof that it has helped credit unions continue to serve members, CUNA explains that it did not provide full relief for many credit unions.
2. Mortgage servicing
The CFPB claims that it has tailored its servicing rules by making certain exemptions for small servicers that service 5,000 or fewer mortgage loans, but the latest survey results from CUNA members say otherwise.
In the recent survey, more than four in 10 credit unions (44%) that have offered mortgages sometime during the past five years indicate they have either eliminated certain mortgage products and services (33%) or stopped offering them (11%), primarily due to burden from CFPB regulations.
3. Home Mortgage Disclosure Act (HMDA)
CUNA cites that it is hard to say HMDA is tailored to minimize the impact on small entities given that prior to the rule credit unions were not required to report HMDA data on HELOCs.
CUNA's recent survey of its members showed that nearly one in four credit unions (23%) that currently offer HELOCs plan to either curtail their offerings or stop offering them completely in response to the new HMDA rules. And CUNA says it believes this is a conservative estimate.
Although the CFPB regularly cites the exemption to entities that provide fewer than 100 remittances annually as an example of providing relief to small entities, CUNA states that this is probably the clearest example that the CFPB is simply not listening.
Instead, the letter states, “This rule has made it more expensive for members to remit payment and has drawn consumers away from using credit unions and into the arms of the abusers for which the rule was designed.”