April 7, 2011 – Credit unions – especially small ones like her 17-employee institution – will suffer greatly under the weight of new regulatory burden due to activities of the Consumer Financial Protection Bureau, Washington Gas Light FCU President Lynette Smith told lawmakers Wednesday.
Smith, testifying on behalf of NAFCU before a House Financial Institutions Subcommittee hearing, told lawmakers considering legislation to revise the CFPB’s structure – legislation that is supported by NAFCU – that her credit union cannot be sure of its ability to keep sufficient staff just to address regulatory compliance matters once the bureau is in full swing.
Her credit union’s regulatory burden has been growing steadily under rule changes over the past couple of years under the Credit CARD Act, the Federal Reserve’s overdraft regulation and new mortgage disclosure requirements, Smith told the panel. With the CFPB, costs will rise.
“I can’t compete with a larger credit union,” she told Rep. Patrick McHenry, R-N.C., in answer to his question about the impact of the added burden. The number of credit unions has dropped from more than 12,000 over the past two decades to fewer than 8,000, she added. “I think we will see that number go down. I am really concerned about the credit union industry’s survival,” she said.
Smith emphasized that credit unions weren’t party to the activities that fueled the financial crisis, and lawmakers on both sides of the aisle agreed.
Rep. Carolyn McCarthy, D-N.Y., pointed out that the law does say the CFPB “must consider the impact of the proposed rule on community banks and small credit unions, and consult with banking regulators.” McCarthy said the CFPB is necessary because “no one is there to protect the consumer,” and said it should be allowed to try.
“We appreciate that, and we would urge Congress to make sure the concerns of small institutions like credit unions are taken into account as the CFPB goes forward,” Smith replied. But despite that consideration, added compliance burden “would still be inevitable.”
NCUA, she said, is a good regulator and maintains contact with her credit union on negative trends in the marketplace, including predatory mortgage lending. It is also quick to act on the few consumer complaints it receives about credit unions. “NCUA does a good job.”
Smith testified in favor of giving the CFPB a five-person commission to ensure a greater breadth of experience for CFPB leadership; she also backed making it easier for the Financial Stability Oversight Council to veto CFPB rules for safety-and-soundness reasons.
She also weighed in briefly on the Dodd-Frank Act debit interchange provisions. Her credit union would be “devastated” under the fee cap rule, she said.
The hearing was webcast and is archived online.