NCUA asks CFPB for examination and enforcement authority over largest credit unions

"The CFPB and the NCUA can and should work together"

National Credit Union Administration Chairman J. Mark McWatters wrote a letter to Consumer Financial Protection Bureau Director Richard Cordray, asking to be the primary agency responsible for the examination and enforcement of consumer financial protection laws for credit unions with assets of more than $10 billion.

Under the current system, the CFPB oversees credit unions with assets of more than $10 billion.

“Subjecting federally insured credit unions and their consumer/member owners to the dual examination—and, in the case of federally insured, state-chartered credit unions, triple examination—regime mandated under Section 1025 of the Consumer Financial Protection Act imposes unnecessarily burdensome costs, particularly given their positive, consumer-focused role,” McWatters said.

“I believe the CFPB and the NCUA can and should work together,” he said. “As the prudential regulator of federally insured credit unions, the NCUA possesses a broader arsenal of enforcement tools than is available to the CFPB, allowing the agency to take more targeted actions to protect consumers and address consumer financial protection law violations.”

And the exemption really only pertains to a small handful of credit unions. According to NCUA, only Navy Federal Credit Union, State Employees’ Credit Union, Pentagon Federal Credit Union, Boeing Employees Credit Union, Schools​First Federal Credit Union, and The Golden 1 Credit Union have assets of $10 billion or more.

This means that of the more than 5,700 FICUs operating in the U.S., only 6 currently have $10 billion or more in assets.

But while it’s only 6 credit unions, it’s important to note that the CFPB has already, under its enforcement and examination authority, fined one of them for deceiving consumers.

Back in October of last year, the CFPB took action against Navy Federal Credit Union and ordered them to pay $28.5 million for improper debt collection practices.

The CFPB ordered Navy Federal to pay $23 million in compensation to consumers who received threatening letters. They also had to pay a penalty of $5.5 million to the CFPB’s Civil Penalty Fund.

And on top of this, Navy Federal also receives a fair share of complaints in the CFPB Consumer Complaint Database. According to an article from Credit Union Times in 2015, Navy Federal Credit Union was the 14th most complained about company.

A quick search of the latest Consumer Complaint Database pulls up the following total complaint numbers for the six credit unions: Navy Federal Credit Union (2,614), State Employees’ Credit Union (137), Pentagon Federal Credit Union (671), Boeing Employees Credit Union (95), SchoolsFirst Federal Credit Union (33), and The Golden 1 Credit Union (12).

The NCUA argued, though, that since it is the prudential regulator of FICUs, it possesses and is able to bring to bear a broader arsenal of enforcement tools than is available to the CFPB when dealing with problem credit unions.

The move would also, according to NCUA, "address the inherent unfairness that occurs when aggressive punitive fines are imposed on FICUs and their member owners, minimize unnecessary examination costs for FICUs, and protect consumers in a way that is fair while also maintaining a level playing field for all parties involved.”

McWatters stated in the letter, “As not-for-profit, consumer-owned and -controlled financial institutions, FICUs serve a unique, positive role for consumers in today’s financial services marketplace. I believe that role can and should be distinguished from the role played by for-profit, investor-owned and–controlled financial institutions.”

However, the NCUA is not trying to cut the CFPB out of the process. McWatters added that this requested change would not affect the CFPB’s exclusive rulemaking authority over federally insured credit unions, and the bureau would still be able to take enforcement action if it determined NCUA was not adequately enforcing consumer protection laws.

Instead, McWatters explained that shifting authority would free up the CFPB’s examination and enforcement resources to focus on larger investor-owned, for-profit institutions while continuing to provide consumer protections for credit union members.

“I believe granting federally insured credit unions an exemption from Section 1025 will help ensure they are treated fairly and equitably while also maintaining consumer protections and a level playing field for all parties involved,” McWatters said.

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