ALEXANDRIA, Va. — Although located across the river from Washington, D.C., NCUA is feeling the heat of Congress' new focus on consumer protectionism.
"If you've been watching on Capitol Hill, this is the direction they've been getting from congressional oversight," NAFCU Director of Legislative Affairs Brad Thaler said. He pointed to a May letter from Committee Chairmen Barney Frank (D-Mass.) and John Dingell (D-Mich.) that urged the Federal Reserve Board, Office of Thrift Supervision, Federal Trade Commission, Office of the Comptroller of the Currency, and FDIC to take a harder look at the disjointed regulatory scheme that confuses consumers on where to turn for help including state versus federal; the serious subprime mortgage problems and foreclosures; and credit card marketing, billing and other
practice "innovations."
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"I do think there is an environment in the Democratically-controlled Congress that is encouraging a greater look at consumer protections," CUNA Deputy General Counsel and Senior Vice President of Regulatory Advocacy Mary Dunn agreed. However, she added issues like tightening up of Bank Secrecy Act oversight could have led "the regulators to be more aggressive in their regulating" in general.
While the Frank-Dingell letter was not addressed to NCUA, the message was loud and clear. "If an agency doesn't look out for the consumer in the regulator form, then they will in the legislative form," Thaler observed. Being proactive is better than having it "handed down to them," he hypothesized.
NCUA's focus on consumer protectionism has manifested itself in recent regulatory proposals, including the member access to books and records, merger compensation disclosure, and eligible obligation conflict of interest proposed regulations. "Congress has taken a more activist approach to a variety of consumer issues," NCUA Director of Public and Congressional Affairs John McKechnie said. This focus has "enabled" NCUA to demonstrate the consumer protection and member rights side of its oversight responsibilities, he added.
Even prior to the turn over in Congress, however, NCUA had been working to get credit union members more informed when their institutions consider a conversion to a mutual savings bank. From a policy standpoint, NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt pointed out, the agency had expressed "concern that members really weren't informed on what a conversion meant."
She added that NAFCU generally supports transparency, but cautioned, "We want NCUA to be active and draft good regulations and not overreact." In the member access proposal, if it is narrowly tailored it might not draw legal challenges from charter choice proponents, but the agency is "always potentially at risk, particularly when there is not a history of regulations." At this time, she has not heard of any such challenges. NAFCU and a number of others have asked NCUA to go back to the drawing board with this proposal.
The proposed regulation on merger compensation disclosure has also raised the ire of the credit union trade associations. Dunn commented, "We need to be more focused on what the problems are rather than regulate the whole industry whenever something comes up." When problems do arise, they should be addressed in the least burdensome way, she said.
Specifically on the merger compensation proposal, she asked, "Does the punishment fit the crime so to speak?" A letter to credit unions might have been a better first step, according to Dunn.
With this type of disclosure, Hunt forecast, "What could be a run of the mill business decision could get blown out of proportion."
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