Since its founding in 1967, NAFCU has been a highly effective advocate for federal credit unions. Over the years, the need for federal advocacy has grown exponentially.
This has been particularly true since the July 2010 implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the establishment of the CFPB. We knew this behemoth of a law would exact an extraordinary toll on credit unions. In fact, when Congress proposed creating the CFPB, NAFCU was the only financial services trade association to oppose placing credit unions under the bureau's direct regulatory authority.
Strengthening the federal charter and pursuing regulatory relief for federal credit unions is at the core of NAFCU's advocacy efforts. Unfortunately, we have lost 1,250 federally insured credit unions, more than 17% of the industry, since the second quarter of 2010. The overwhelming majority of these were smaller institutions below $100 million in assets.
To stem the continuous wave of federal regulations, NAFCU released a Five Point Plan for Credit Union Regulatory Relief and introduced a top 10 list of regulatory requirements that should be eliminated or amended.
In addition, to address the marketplace pressures as well as the burgeoning compliance costs and to better serve our members, NAFCU revamped its strategy to focus on its core competencies – advocacy, education and compliance assistance. NAFCU's recent decision to allow federally insured, state chartered credit unions to join the association will strengthen the association's advocacy efforts with federal lawmakers and regulators.
Federal Legislative Advocacy
On Capitol Hill, NAFCU has been tireless in its efforts to advance legislation that is in the best interests of credit unions and their members, and to mitigate the unintended, potentially negative impact of new measures.
Here are just a few of the key legislative areas that we have seen progress in this year:
The NCUA Budget Transparency Act (S. 924), introduced by Sens. Dean Heller (R-Nev.) and Mark Warner (D-Va.). The new bill would require the NCUA to provide notice of a public hearing on its budget and invite comments. It is the companion bill to H.R. 2287, introduced by Reps. Mick Mulvaney (R-S.C.) and Kyrsten Sinema (D-Ariz.).
The Data Security Act of 2015 (H.R. 2205), introduced by Reps. Randy Neugebauer (R-Texas) and John Carney (D-Del.). The bill would set data protection standards, outline a process for notifications and recognize financial institutions' compliance with the Gramm-Leach-Bliley Act. It is the companion bill to S. 961, introduced by Sens. Tom Carper (D-Del.) and Roy Blount (R-Mo.).
The Risk-Based Capital Study Act of 2015 (H.R. 2769) introduced by Reps. Stephen Fincher (R-Tenn.), Bill Posey (R-Fla.) and Denny Heck (D-Wash.). The bipartisan legislation seeks to compel the NCUA to quantify the necessity, legality and impact of the agency's proposal.
NAFCU has also been a stalwart advocate for credit unions with federal regulators on many fronts.
Risk-Based Capital
Since the NCUA's release of its first risk-based capital proposal in January 2014 through this year's updated version, NAFCU's position hasn't changed: The credit union industry does not need this rule, and the NCUA should withdraw it. Also, NAFCU has long advocated for a risk-based capital regime that reflects lower capital requirements for lower-risk credit unions and higher capital requirements for higher-risk credit unions. Unfortunately, the NCUA's current proposal is far from such a system.
NAFCU firmly believes that the current, proposed risk-based capital approach taken by the NCUA does not adequately address the capital needs of the credit union industry, even in the event of another severe financial market downturn. Serious questions remain about the NCUA's legal authority to divide the credit union system by applying a two-tier RBC requirement as proposed. NAFCU believes legislative changes are necessary to bring about comprehensive capital reform for credit unions – reform that includes credit union access to supplemental capital sources – and making the statutory changes necessary to design a true risk-based capital system that is fair for all credit unions.
Field of Membership
NAFCU fundamentally believes that the federal charter must keep pace with changes in state laws and technology advancements in the financial services industry. NAFCU continues to hear from our members that the NCUA's FOM Rules and Regulations unnecessarily inhibit their ability to grow and serve their communities. As the NCUA considers amending its current Chartering and FOM Manual, NAFCU and our members encourage the agency to fully utilize its statutory authority to provide requisite relief to our industry.
In April, the NCUA approved a final rule authorizing automatic approval of 12 types of associational groups for inclusion in federal credit unions' FOM. NAFCU appreciates the NCUA's efforts to streamline certain requirements for amending a federal credit union's FOM. However, we believe that the NCUA can do more and enact constructive regulatory relief by streamlining its chartering and FOM procedures, as well as removing all non-statutory constraints on FOM chartering and expansion.
Member Business Lending
We are beginning to see progress regarding the agency's position on member business lending. In June, the NCUA Board proposed to eliminate the MBL waiver process and allow credit unions to decide for themselves if a borrower should be exempt from a personal guarantee. We welcome many aspects of this proposal, though we are concerned with the agency's initial estimates of how much the NCUA will spend to implement the rule. NAFCU is pressing for a broader change in the MBL rules that would allow an exemption from the MBL cap for more credit unions.
CFPB
We appreciated the CFPB's proposed extension of the effective date of the Truth in Lending Act and Real Estate Settlement Procedures Act integrated mortgage disclosure rule to October 3. We appreciated Director Richard Cordray's announcement the bureau will consider "good faith efforts" by credit unions to comply with the new integrated mortgage disclosures rule set to take under TILA/RESPA. However, we were disappointed that the CFPB did not take this opportunity to permit an early compliance period for credit unions.
We also recognize NCUA Chairman Debbie Matz's efforts on TILA/RESPA. She was the first regulator to acknowledge the extraordinary value of recognizing "good faith efforts" by credit unions to comply with this complex rule.
Ultimately, federal advocacy is a core competency for NAFCU. While our membership base has been broadened to allow federally insured, state chartered credit unions to join, we have not changed our federal focus. We look forward to continuing to champion the unique value of credit unions on the Hill, with the administration and with federal regulators. We will continue our efforts to ensure that credit unions prosper and that any federal legislation or regulation affecting them is done in the best interest of credit unions and the 100 million members they serve.
B. Dan Berger is president/CEO of NAFCU. He can be reached at 703-522-4770 or [email protected].
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