To forecast what lies ahead in 2010, one has to consider the enormous legislative and regulatory challenges of 2009. Work on legislation to overhaul the regulatory restructuring of the financial services system and the conservatorship of the two largest corporate credit unions were significant factors. At the same time, share insurance and stabilization fund assessments burdened credit union balance sheets. NAFCU worked intensely to counter regulatory reforms that would negatively impact credit unions and their members. Nevertheless, we fully expect that the stage has been set for what promises to be a tumultuous environment for our industry in 2010.
NAFCU took a very visible leadership role in ensuring the defeat of mortgage bankruptcy cram-down legislation. We have steadfastly maintained that mortgage cram-downs should be limited to subprime or nontraditional mortgages. We were successful in advancing our case by twice defeating efforts to pass legislation creating broad cram-down authority, first in the Senate and then in the House. We are cautiously optimistic that Congress now recognizes that this is not the way to remedy the foreclosure situation, but we will keep a keen eye on any developments in this front.
Another issue that impacts credit unions is the proposed creation of a Consumer Financial Protection Agency to assume the consumer protection responsibilities of all the current federal financial institution regulators, including the NCUA. NAFCU successfully won a provision in the House-passed Wall Street Reform and Consumer Protection Act that effectively excludes all credit unions from paying into a dissolution fund for the wind-down of large firms. It also got a clarification by Rep. Gary Peters (D-Mich.) that another provision dealing with Troubled Assets Relief Program shortfalls only affects institutions that pay into that fund.
Challenges with the CFPA proposal remain, however, including an exemption from primary CFPA examination authority that only applies to credit unions with less than $10 billion in assets. This exemption is not inflation-adjusted, and over time many more credit unions would be subject to CFPA examination. Even more troubling is the arbitrary $10 billion ceiling that could divide our industry in the future on a wide range of issues. As I have always said, “A credit union, is a credit union, is a credit union.”
We also have a number of other important concerns with the CFPA. While an amendment on the House floor attempted to restore some federal preemption standards for banks, it remains unclear how federal preemption standards for credit unions would be impacted. The House-passed version of the CFPA also impacts all credit unions in these areas: the ability to strip oversight of NCUA should the CFPA director believe an NCUA exam to be inadequate; the ability to initiate enforcement proceedings if the NCUA does not act; and authority to broadly regulate areas like fair lending. In addition, the House-passed bill mandates 5% credit risk retention on mortgages with the ability of the regulators to create exemptions.
As a result, when the Senate takes up financial reform, NAFCU will continue to strongly advocate for a CFPA exemption for credit unions.
Last year's economic conditions limited capital sources for small businesses. NAFCU seized opportunities to reach out to the national media and inform lawmakers of our industry's willingness to help. We made numerous and repeated contacts with lawmakers and the administration to raise the credit union member business lending cap and suggested ways to expand credit unions' participation in SBA programs. NAFCU continues to push for lawmakers' support for H.R. 3380, the Promoting Lending to America's Small Businesses Act, and S. 2919, the Small Business Lending Enhancement Act. Both measures would raise the MBL cap from 12.25% of total assets to 25%.
In 2009, merchants again successfully lobbied the House and the Senate to introduce legislation that would artificially cap interchange fees. While a hearing was held on a House bill this past fall, no action has occurred on any of these bills as of yet. We continue to work towards defeating any proposed interchange legislation independently, as well as through our active participation in the Electronic Payments Coalition.
NAFCU was also successful in pressing for industry-wide support for an alternative capital proposal that was delivered to the NCUA for its consideration. Following these efforts, the agency has forwarded proposed legislation to Congress that we are hopeful will receive legislative action this year.
In 2010, it is unlikely that either Congress or the administration will relent in their efforts to reform the financial services industry. NAFCU recognizes that credit unions were not responsible for the practices that led to this crisis. Our objective remains clear and unrelenting-ensuring that credit unions are not swept into any broad legislative or regulatory proposals that would only add to their already significant regulatory burden. A regulatory burden that is, in fact, already the greatest among all depository institutions.
The good news is that credit unions' outstanding service and work is serving as an example to others in the financial services industry and is being increasingly noticed and commented upon in the national media and among our nation's leaders. By upholding your commitment to responsible fiduciary management and exceptional member service, you are in fact squelching the critics.
Fred Becker is president of NAFCU. He can be reached at 703-522-4770 or [email protected]
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