The expansion and contraction of financial regulation often follows the arc of a pendulum, a slow and ponderous trajectory that is invariably drawn backwards as tempers cool and confidence in the financial sector exerts its influence. After the financial crisis, the forces pushing the pendulum in the direction of complex regulatory standards were born out of fear and distrust of large banks. However, credit unions were also swept up in the whirlwinds of the Dodd-Frank Act, despite having played no part in the financial crisis. Since that time, credit unions have been waiting for the pendulum to swing back in the other direction and for the stifling regulatory environment to loosen. At NAFCU, we have been working on creating a better regulatory environment in 2017 and beyond.
The Stop Watch
President Trump has wasted no time setting the stage for a vast rollback of regulations. On Jan. 20, the president issued an executive order calling for regulators to reduce regulations and control regulatory costs. The president also asked agencies to review recently issued regulations to determine if they can also be eliminated. The White House has since issued interim guidance clarifying that not all regulations are necessarily on the cutting board; proposals that are aimed at easing regulatory burden will be evaluated under a "net cost impact" analysis to determine if they must be offset. The NCUA has had a great start recently in eliminating unnecessary or burdensome rules, and we believe that Acting Chairman J. Mark McWatters has correctly characterized new field of membership and alternative capital proposals as regulatory relief. However, there is certainly more to be done to ease costs on credit unions, particularly with respect to new risk-based capital standards.
In his second week, President Trump issued an executive order for a major review of the Dodd-Frank Act as well as a directive to the Labor Department to delay implementation of the fiduciary rule pending further review. The executive order launches a dialogue among top regulators on ways to ease Dodd-Frank rules in keeping with the administration's "core principles" for regulation, among them ensuring regulation is appropriately tailored and fosters economic growth.
While we appreciate this order, we should not be counting down the clock on it. Any recommendations for specific Dodd-Frank Act changes would require congressional action. On Feb. 8, a Texas federal judge upheld the Labor Department fiduciary rule. The Labor Department is expected to soon announce a 180-day delay of its fiduciary rule implementation date (which is currently set for April 10).
The Grandfather Clock
The witching hour can't come soon enough for the CFPB, the source of almost all of credit union overregulation. NAFCU strongly supports consumer protections, but it stood as the only financial industry trade association to oppose placing credit unions under CFPB authority as the Dodd-Frank Act was being written, and it supports member-owned credit unions being exempted from CFPB rules. NAFCU also supports efforts to provide common-sense checks and balances on the power of the CFPB, such as a commission structure for the bureau's governance. The problem with CFPB regulation already in place, however, is that some rules will be very expensive to unwind.
The Sundial
Congress moves at the speed of the sun slowly marching across a sundial. Congress may use the Congressional Review Act to unwind some recently finalized rules, like the bureau's prepaid account proposal. However, the CRA is a clunky mechanism to fight overregulation which was "hastily" promulgated in the final hours of the previous administration. To achieve real relief, Congress needs to act. Several of the provisions in the Financial CHOICE Act introduced last Congress by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) offer some hope. For a start, NAFCU supports repealing the Durbin amendment of the Dodd-Frank Act, amending other parts of the act and changing rules on capital.
For some credit unions, time has already passed, and the relief comes too late to have prevented the shuttering of their doors. For others, the race is on to cut red tape and put savings back into the hands of their members, where it belongs.
NAFCU is leveraging every minute to reduce the regulatory burden and create a more favorable regulatory environment for credit unions. We have been meeting with new and returning members of Congress and the Trump administration to keep credit union concerns front and center. Ultimately, as constituents, your voice resonates the loudest with lawmakers in their local congressional districts and here in Washington. We need you in this fight. Together, we can make it credit unions' time to succeed!
Carrie Hunt is EVP of Government Affairs & General Counsel for NAFCU. She can be reached at 703-842-2234 or [email protected].
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