The NCUA created its Office of Consumer Protection in 2008. It was done not to establish another office of government oversight, but rather to keep the regulation of credit unions within the agency authorized by statute. Who better to monitor credit unions than the regulator that charters, insures, supervises and examines them?
The NCUA OCP was in play before the passage of legislation creating the CFPB. Prior to its passage, the NCUA argued, unsuccessfully, to have credit unions removed from CFPB oversight, citing the fact that a mechanism had already been created to oversee how credit unions handled consumer issues and how they responded to consumer concerns. It seemed practical that those charged with the regulation of credit unions would know what was best for both the industry and the consumer. The fact that it was practical perhaps led Congress to believe it was illogical.
Efforts made by credit union trade associations to get the CFPB to acknowledge credit unions are different and should not be placed under the countless regulations the agency has promulgated have been fruitless. The CFPB seems to believe that they do not have the authority to carve out such an exception, or perhaps they are fearful of a backlash from other financial institutions that would claim favoritism and the creation of a playing field that is not level.
The speculated reasons why the CFPB continues to stall are neither factual nor plausible. The agency has the authority not only to differentiate regulations for various types of financial institutions, but to exempt those to whom the regulations do not apply and are an excessive burden. Further, the playing field is already lopsided, with credit unions not having the member business lending flexibility that others do and being limited as to who they can serve.
It is unfortunate that the CFPB does not understand the credit union concept even after almost seven years at looking at and having the model explained to them. They seem to cast aside the ability of the NCUA to successfully monitor credit unions and insure the protection of consumers. It's another nonsensical conclusion when the NCUA has been doing it for decades.
While I'm not an advocate of Congress jumping in on every regulatory issue, this one seems to require an outside party with some mojo to ask the CFPB why it is dragging its feet. Credit unions' attempts to get the CFPB to listen have fallen on deaf ears. Maybe it's time for the legislative bull horn to take over.
Michael Fryzel is a Chicago-based attorney and former chairman of the NCUA board. He can be reached at [email protected].
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