Dodd-Frank Act. Source: Shutterstock
Ten years ago today, the Dodd-Frank Act was signed into law. With it came sweeping financial reforms in response to the anti-consumer behaviors of Wall Street banking behemoths that caused the 2008 financial crisis.
While it was important Congress acted quickly to reign in the egregious practices of the big banks, credit unions – which have been heralded for not contributing to the financial crisis – were caught in the crosshairs unnecessarily. As a result, credit unions and their members have long paid the price of over-regulation.
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Following the enactment of the 2,300-page law, new and complicated compliance protocols have raised operational costs and caused unintended fatigue and stress on credit unions' resources over the past decade. Credit unions, as they are accustomed to doing, have managed to do more with much less while still serving their members. But regulatory burdens have led to an era of mass consolidation. Before passage of the Dodd-Frank Act, there were more than 10,000 credit unions in operation. Today, that number has been nearly cut in half. Credit unions, and our communities by extension, are paying the price.
While some credit unions have grown since 2008, the median credit union holds just $37.1 million in assets, according to NCUA quarterly Call Report data. Fast forward to today, and we have a new crisis that credit unions have been facing – how to help their members during the COVID-19 pandemic. This crisis has shown that we need deregulation now more than ever.
The fact is this: Credit unions are small community-based institutions that should not be regulated as if they are Wall Street mega-banks.
In 2008, NAFCU fiercely opposed putting credit unions of any size under the authority of the CFPB, an agency created by the Dodd-Frank Act. That's a fight we continue to this day. Credit unions as member-owned, not-for-profit cooperatives already stand for their members.
With the Supreme Court's recent decision finding the CFPB's single-director structure to be unconstitutional, our nation's highest court has breathed new life into our advocacy efforts. NAFCU has long held that the agency should be led by a bipartisan commission to promote greater transparency, accountability and long-term stability for consumers.
As the high court forces changes to the agency's structure, now is the time for Congress to act. Recently, Sen. Deb Fischer (R-Neb.) and Rep. Blaine Luetkemeyer (R-Mo.) have led this fight in Congress and have introduced bills to achieve this goal. NAFCU fully supports their efforts.
More so, we continue to chip away at the regulatory burdens placed upon credit unions by the agency. We recently secured reforms removing problematic ability-to-repay underwriting requirements from its small-dollar-loan rule and an extension to the expiration date of the Government-Sponsored Enterprises Qualified Mortgage Patch.
While these are strong wins that will help credit unions as they serve their 121 million members, policymakers should not shy away from making necessary changes to a 2,300-page law drafted a decade ago.
At a time when many consumers and small businesses need financial assistance, now is the perfect time to reflect and consider important regulatory reforms that would provide credit unions with the appropriate environment to help make the members and communities they serve stronger.
As Congress considers how to best keep the economy moving in the right direction, we ask our policymakers to help credit unions do what they do best: Serve their members. Capital relief and member business lending relief will go a long way to help the cause.
The time to act is now.
Dan Berger B. Dan Berger is President/CEO for NAFCU in Washington, D.C.
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