A prominent credit union executive from Virginia called on Congress Tuesday to undertake major changes to ease the authority of the fledgling Consumer Financial Protection Bureau over credit unions and banks.
"I cannot emphasize enough how burdensome and costly the unnecessary and duplicative compliance costs [of new CFPB regulations] are to credit unions," said Lynette Smith, president of Washington Gas Light FCU, during a hearing before the House Financial Services Committee which is reviewing proposed reforms to the CFPB.
Smith, who was representing NAFCU at the hearing, endorsed legislative proposals to water-down the power of the CFPB by replacing it with a five-person board; to make it more difficult for the CFPB to collect data from regulated entities; to require the CFPB to conduct a public cost-benefit analysis of each regulatory proposal; and to allow NCUA to overrule the consumer agency on regulations covering credit unions.
Many of these proposals were endorsed during a year-long filibuster of the nomination of CFPB Director Richard Cordray by Senate Republicans, who insisted they would not allow a vote on any CFPB director unless President Obama agreed to change the oversight of the new agency to a five-member board and give Congress control over the purse strings. A filibuster-proof group of 44 GOP senators eventually agreed to lift their objections, after which Cordray was overwhelmingly confirmed by the Senate.
Rep. Shelly Moore Capito (R-W.V.), who chaired today's hearing, insisted the legislation was not aimed at weakening the CFPB, but at "improving its oversight and providing greater accountability and diversity of opinion." Rep. Sean Duffy (R-Wis.), insisted the CFPB "has no accountability."
Other witnesses at today's hearing called by House Republicans, who opposed creation of the consumer agency in the Dodd-Frank Act, voiced similar support for legislation to water-down the two-year-old agency's powers.
"The prerogative of Congress to decide the direction and parameters of the consumer financial product market has essentially been delegated to the Bureau," stated Robert Tissue, CEO of Summit Financial Group and chairman of the West Virginia Bankers Association. "An important principle that underlies these and other bills is that there needs to be an effective check and balance on the Bureau's authority."
Still, proposals by the Republican-controlled House to reform the CFPB are unlikely to be passed any time soon by the Democratic-controlled Senate, which has urged the public to give the new agency some time to find its way before embarking on major reforms.
Washington Gas Light FCU's Smith explained that credit unions always objected to the creation of a new consumer agency to regulate them because they feel that NCUA and other government agencies have adequate authority to monitor them for consumer compliance.
"Despite the fact that credit unions are already heavily regulated and did not contribute to the financial crisis, credit unions of all sizes are still subject to the rulemaking authority of the CFPB," said Smith, who has testified before Congress several times in the past few years.
"While some may argue that the CFPB is 'leveling the playing field' for community-based financial institutions, the reality could not be further from the truth, as smaller community-based financial institutions do not have the armies of lawyers that large Wall Street banks have to keep up with the pace of regulations coming out of the CFPB."
"Credit unions, many of which have very small compliance departments, and in some cases a single compliance officer, must comply with the same rules and regulations as our nation's largest financial institutions that employ countless numbers of lawyers and compliance staff," she explained.
"While we believe that the CFPB can fill an important role in regulating the previously unregulated bad actors that operate in the financial services marketplace, credit unions remain at a loss as to why they were placed under a new regulatory regime to begin with as it has meant an overwhelming increase in regulatory burden," Smith testified. "Given the fact that the CFPB is here to stay, we think it is important that Congress examine ways to improve the bureau."