Newsroom

April 26, 2017

Lawmakers cite CUs' reg burdens during 'CHOICE Act' hearing

The Dodd-Frank Act's impact on the current regulatory environment and smaller financial institutions such as credit unions was cited often by House Financial Services Committee members and witnesses during Wednesday's hearing examining the "Financial CHOICE Act," introduced by panel Chairman Jeb Hensarling, R-Texas, as H.R. 10.

Subcommittee on Housing and Insurance Chairman Sean Duffy, R-Wis., and panel member Ed Royce, R-Calif., both noted the negative impact the Dodd-Frank Act has had on community financial institutions. Duffy said credit unions were closing in his community and that the Dodd-Frank Act seemed to be protecting the big banks over smaller institutions. Royce echoed that assessment, noting the heavy burdens imposed by the Dodd-Frank Act have put smaller institutions at a disadvantage.

Hearing witness John Allison, former president and CEO of the Cato Institute, agreed. He said CEOs of smaller institutions have to spend their time focusing on regulation rather than helping those in their community. Royce added that today's environment is also putting smaller institutions at risk of being bought by bigger institutions. Allison added that Dodd-Frank regulations have made it much harder for new community banks and credit unions to open.

Royce also touched on the Dodd-Frank Act's exemption authority for the CFPB, which NAFCU has repeatedly pointed out in urging the bureau to release credit unions from certain rulemakings. Royce asked Allison if the CFPB is using this authority appropriately. Allison said no, and added that regulators aren't going to exempt community institutions.

Many other members of the committee, including Reps. Keith Rothfus, R-Penn., Scott Tipton, R-Colo., Bruce Poliquin, R-Maine, Mia Love, R-Utah, and Tom Emmer, R-Minn., also noted the negative impact the Dodd-Frank Act has had on community financial institutions.

Discussing components within the CHOICE Act discussion draft, hearing witness Norbert Michel, senior research fellow of financial regulations and monetary policy at The Heritage Foundation, said in his opening statement that the Durbin interchange amendment should be repealed. A joint letter supporting the discussion draft's language to repeal the Durbin amendment, signed by NAFCU and other trade association members of the Electronic Payments Coalition, was issued into the hearing's record.

Regarding the Durbin amendment, Rep. Ted Budd, R-N.C., noted how in the history of the U.S., setting price controls has always failed. He asked witnesses if the Durbin amendment falls into that same category; both Allison and Michel said it has failed to benefit consumers.

Wednesday's hearing also touched on other areas of the Dodd-Frank Act, such as the CFPB's enforcement authority to address unfair, deceptive or abusive acts and practices. Financial Institutions and Consumer Credit Subcommittee Chairman Blaine Luetkemeyer, R-Mo., asked witnesses if the CFPB has ever defined UDAAP; the answer was no. NAFCU has also advocated for the elimination of CFPB's supervisory authority with respect to UDAAP.

In a letter to the committee ahead of Wednesday's hearing, NAFCU President and CEO Dan Berger noted the association's support of the draft language of the Financial CHOICE Act and provided analysis of the draft.

The House Financial Services Committee is reportedly seeking to mark-up the Financial CHOICE Act on Tuesday.