April 06, 2011

NAFCU: CFPB scope too broad

April 6, 2011 – Lynette Smith, president and CEO of Washington Gas Light FCU in Springfield, Va., goes before a House subcommittee today to detail NAFCU's concerns about credit unions being made subject to authority of the new Consumer Financial Protection.

NAFCU was at the forefront in opposing the inclusion of credit unions under the CFPB's regulatory authority. The association, throughout the drafting and debate on the Dodd-Frank Wall Street Reform and Consumer Protection Act, urged that the new entity focus not on credit unions but on unregulated service providers whose activities helped fuel the financial crisis.

"We believe that if a CFPB is to exist, its primary focus should be on regulating the unregulated in the financial services arena, and not adding new regulatory burdens to those entities that already fall under a functional regulator," according to Smith's written testimony prepared for today's hearing. The authority to regulate all credit unions, she states, should be returned to NCUA.

The Dodd-Frank Act gives the CFPB regulatory authority over consumer financial services offered by all credit unions and other insured institutions. It also provides the CFPB with examination and enforcement authority over providers except with respect to institutions having less than $10 billion in assets. This means only the three largest institutions are subject to the latter authorities, but since the cut-off is not indexed for inflation, more will come under the CFPB's full authority over time.

Today's hearing focuses on measures to improve the CFPB, including bills to replace the CFPB director position with a five-member commission and to require only a simple majority vote of Financial Stability Oversight Council members to veto certain CFPB rules for safety-and-soundness reasons. NAFCU supports those measures. If a CFPB director is to lead the agency, NAFCU recommends a delay in the transfer of authorities to the CFPB until it has a Senate-confirmed director.

NAFCU is also recommending that the asset-size threshold for the exemption from CFPB examination and enforcement authorities be raised to $50 billion in assets.

Today's hearing begins at 10 a.m.