The regulatory burden on credit unions can best be described as death by a thousand cuts. It is not one single regulation, but multiple regulations from numerous agencies that are negatively impacting credit unions.
The burden has had a dramatic effect on the industry. Since 2007, the number of credit unions has dropped by 22%, or more than 1,700 institutions.
This burden is further exacerbated by the gross underestimation of cost and time required to comply with the regulations. A March 2013 survey of NAFCU's membership found that over 55% of credit unions believe compliance time and cost estimates from the NCUA and the Consumer Financial Protection Bureau are inaccurate, and often drastically understate the actual time and costs that credit unions expend to comply with regulatory requirements.
NAFCU has consistently maintained that inaccurate cost and time estimates for rulemakings and reporting requirements skew the true regulatory burden placed on the credit union industry.
As an example, Ed Templeton, NAFCU chair and president/CEO of SRP Federal Credit Union in North Augusta, S.C., testified in February before the Senate Banking Committee that his credit union spends approximately 116 employee hours to fill out one NCUA call report. Yet, NCUA's 2014 submission to the Office of Management and Budget estimates the time to complete the call report is 6.6 hours per reporting cycle.
Another flaw of the current regulatory system is that risk is often overestimated, which usually results in a rule that creates more problems than solutions. Such is the case with the NCUA's 500-page, second risk-based capital proposal, which NAFCU strongly believes is unnecessary and will only impose more regulatory burden on an already extremely well-capitalized industry.
Ultimately, credit unions need regulatory relief from Congress and regulators. NAFCU has outlined for 2015 the Top 10 regulations that regulators can and should act on now to provide regulatory relief.
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Improving the process for credit unions seeking changes to their fields of membership.
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Providing more meaningful exemptions for small institutions.
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Expanding credit union investment authority.
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Increasing the number of transfers allowed to be made per month from savings accounts.
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Seeking added flexibility for credit unions that offer member business loans.
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Updating the requirement to disclose account numbers to protect the privacy of members.
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Updating advertising requirements for loan products and share accounts.
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Seeking improvements to the Central Liquidity Facility.
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Obtain flexibility for federal credit unions to determine their choice of law.
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Update, simplify and make improvements to regulations governing check processing and funds availability.
This is not an exhaustive list, but we believe our recommendations reflect common sense adjustments that will help credit unions' long-term viability and allow them to better serve their 100 million members. We look forward to working with Congress and regulators to help make regulatory relief a reality for credit unions – the sooner, the better.
B. Dan Berger is president/CEO of NAFCU. He can be reached at 703-522-4770 or [email protected].
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