Regulatory Reform

Updated August, 2010

Last June the Obama Administration released its plan for reforming the financial regulatory system. The hallmark of the administration’s proposal known as, the   White Paper, was the creation of a new “Consumer Financial Protection Agency” with rule making power over financial institutions, including credit unions. Over the next year, the House and Senate put together and passed differing versions of financial reform legislation.

In June 2010, the House and Senate appointed conferees to sit on a conference committee panel to work out the differences between the House and Senate versions of the bill. The final conference report maintains federal charter and independent National Credit Union Administration. It also creates a new Consumer Financial Protection Bureau (CFPB) housed at the Federal Reserve but with independent rule writing authority. All credit unions would be subject to new rules of the CFPB. Also in the final conference report is a provision that would create a “Financial Services Oversight Council” which would help to oversee systemic risk and can veto, with a two-thirds vote threshold, CFPB rules. NCUA has a seat on the oversight council. The final conference report also maintains the Senate position of no examination and enforcement by CFPB for credit unions under $10 billion in assets, those over $10 billion would be subject to examination and enforcement. NAFCU opposes including credit unions, regardless of size, under any part of CFPB.

The final conference report also includes a provision added by Senator Durbin during floor consideration of the Senate bill that would allow the Federal Reserve to cap debit interchange fees at “reasonable and proportional levels.” Merchants would be allowed to offer discount pricing for different forms of payment, but are still not supposed to discriminate based on issuer. Merchants would also be allowed to set $10 minimums on payment with cards. While much attention has been given to a “small issuer exemption” that exists for the Durbin debit interchange provision, it is unfeasible and provides no relief to credit unions of any size. Proponents of these interchange provisions are aware of this fact, and therefore blocked an attempt in conference to allow the Federal Reserve to study the impact of the legislation on small issuers on an annual basis. The amendment does nothing to prevent card networks from charging higher rates to smaller issuers, who will not be able to compete with price-controlled large banks.

NAFCU has long opposed price caps for interchange fees and the creation of a new Consumer Financial Protection Bureau with authority over credit unions. The inclusion of these two provisions will undoubtedly hurt the same credit unions that have helped blunt the recession for the more than 92 million credit union members nation wide. For these reasons, NAFCU opposes this legislation.

The final conference report passed both the House (237-192) and the Senate (60-39), and the legislation – the Dodd-Frank Wall Street Reform and Consumer Protection Act – was signed into law on July 21.