Sept. 18, 2012 – The Government Accountability Office issued a report that says while some effects are presumed, it’s too early to know just how the Dodd-Frank Act will affect credit unions and community banks until rules are in place and put to work.
The report, requested by Sens. Olympia Snowe, R-Maine, and Mark Kirk, R-Ill., included input from regulators, affected financial institutions and industry trade associations, including NAFCU.
In sum, the GAO echoed assessments that have been made by industry, that is, that much of the law’s impact is unknown. But the GAO did note areas where it appears industry will benefit, and other areas where it take on added regulatory burden.
The GAO found that while the Dodd-Frank Act was aimed primarily at large, complex institutions, stakeholders identified provisions within seven of the act’s 16 titles that are expected to have positive and negative impacts on credit unions and community banks.
For example, some note there may be benefits to these institutions from deposit insurance reforms, public company reporting and Consumer Financial Protection Bureau supervision of nonbanks, which could reduce costs or level the playing field. On the other hand, the report notes that the act’s mortgage reforms may impose more requirements and costs on all banks and credit unions, “but their impact will depend on, among other things, how the provisions are implemented.”
In background information, the GAO report notes the decline over the years in the number of credit unions and community banks – in part due to consolidation – but it says their “relationship-banking model” makes them well-suited to small-business lending. “Historically, community banks and credit unions have played an important role in providing credit to small businesses and other local customers,” the GAO wrote.
NAFCU continues to keep track of, and weigh in on, the CFPB’s rulemaking activities, particularly with respect to mortgage disclosures, ability to repay and the consumer complaint database.