Credit unions have to spend more on compliance costs because the government is regulating with a heavier hand and this results in members having to pay more for certain products and services. That's the message two top executives of Wisconsin credit unions are delivering at a field hearing of a House subcommittee today.
"The regulatory pendulum has swung so far that financial institutions are faced with eliminating services or charging for them to offset the cost and increased regulatory burden of providing them. Many of the new regulations are intended to address abuses in the financial marketplace, or prevent unethical financial practices that harm consumers,'' said Royal Credit Union COO Mark Willer. "Yet, I would challenge any member of this committee to find a single local community credit union or community bank that has been accused of such practices.''
Willer, who is testifying before a Wausau, WI field hearing of the House Financial Services Committee's Subcommittee on Consumer Credit and Financial Institutions, noted that his credit union had to hire an additional compliance specialist to deal with all the new rules. This brings the total number of employees who deal with compliance to five (in addition to outside parties) at the $1.8 billion Eau Claire, Wisconsin-based credit union. He noted that many of the laws and regulations "confuse and financially harm the very consumers they intended to protect.''
Central City CU President/CEO Patricia Wesenberg said that the "barrage of regulations creates an unnecessary burden without any measure of the effectiveness of these changes. They are costly, both in time and personnel to implement, and they are confusing to our membership.''
She added that the Consumer Financial Protection Bureau (CFPB) will issue rules mandating changes in processes, documentation and training that will cost credit unions more money. Wesenberg, a board member of CUNA, also said credit unions are "concerned" about how the CFPB and the NCUA will coordinate the implementation of consumer finance protection laws.
While the agency is responsible for implementing 19 consumer protection laws, the enforcement is done by the NCUA except at credit unions with assets of $10 billion or more. Wesenberg's Marshfield, Wisconsin-based credit union has $179 million in assets. Subcommittee Chairman Shelley Moore Capito (R-W.Va.) has said that trying to stem the tide of regulation is one if her panel's goals. But she has said the agency doesn't plan to hold an oversight hearing on the NCUA in the near future.
Read the testimony of the credit union executives here.
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