The 2020 Election Is Finally Over (or Is it?)

Unless you live in Georgia, the seemingly endless 2020 election cycle has mercifully concluded. So how will the election results affect credit unions? Regardless of your political leanings, we should be able to agree that the last 12 years have seen polar opposite administrations as related to legislation and regulations governing our industry. The Obama Administration was determined to correct the perceived excesses exposed by the Great Recession, while the Trump Administration seemed focused on reversing any regulation that the aforementioned Obama Administration adopted. With that in mind, what can we expect in 2021 and beyond?

A More Aggressive CFPB

At press time, barring a successful challenge from President Trump, it appears that President- elect Joe Biden will become the 46th President of the United States on Jan. 20, 2021. A change in administrations will impact credit unions in a number of ways. Although there are no announced plans for financial reform, a Biden Administration will likely return to a more aggressive posture with the CFPB. Credit unions remember all too well the crushing amount of regulations that flowed from the CFPB in the aftermath of the Dodd-Frank legislation. Those days could soon return as credit unions can almost certainly expect a new CFPB director now that the Supreme Court ruling in the Selia Law, LLC v. CFPB case placed the director’s position in political jeopardy. As a result, Director Kathy Kraninger – whose statutory term does not end until 2023 – will likely be replaced early in 2021 with a Biden appointee.

Part two of this observation is that credit unions should not expect to see a legislative change in the structure of the CFPB from a single director to a bi-partisan, multi-member commission during the Biden Administration. While a structural change at the CFPB should remain a high priority for credit unions, it will not happen under a Biden Administration unless another Supreme Court decision forces Congress to act. This may be more likely than before with a more conservative Supreme Court, but will be a long shot if the decision in the Selia case is any indication.

In the meantime, credit unions can expect a Biden CFPB appointee to roll back many of the regulatory relief measures instituted by the Trump Administration. Credit unions can likely expect the bureau to revisit overdraft protection, the Qualified Mortgage Rule and payday lending. A Biden appointee could use UDAAP as a basis to ramp up enforcement actions against financial institutions. Although the debt collection rule was only recently issued, it only applies to third-party debt collectors. Under former CFPB Director Cordray, there was considerable discussion about bringing first-party collectors, including credit unions, under the rule. Any attempt to place credit unions under the Fair Debt Collection Practices Act or similar rule should be vigorously contested, and we should remain vigilant.

New NCUA Board

A change in the White House means that the NCUA board will have a new chairman in 2021. Chairman Rodney Hood will certainly be replaced in the chairman’s seat by Board Member Todd Harper. However, Harper’s tenure as chairman will be limited because his term expires in 2021. Additionally, Kyle Hauptman, who was nominated earlier this year for a seat on the NCUA board to replace Mark McWatters by President Trump, has not been confirmed by the Senate as of this writing. Unless his nomination gets pushed through the Senate in a lame duck session, as is expected, his nomination will expire at the end of the current Congress and President-elect Biden will appoint another Democrat to the NCUA board.

Under this scenario, the balance of power on the NCUA board could shift dramatically. If Hauptman is confirmed, a Chairman Harper would have control of the board’s agenda, but being in the minority, it will complicate his tenure as chairman without forming an alliance with one or both of the other members. If Hauptman is not confirmed before the end of the year, having two new democratic board members and a new NCUA board chairman in 2021 is a real possibility.

Under a Chairman Harper, credit unions should not expect further delay in the Risk-Based Capital Rule. Harper has also advocated for more stringent consumer protections. This might result in more comprehensive examinations for consumer compliance regulations. Harper does not appear to be as much of an advocate for field-of-membership expansions and regulatory relief as has Chairman Hood.

117th Congress

Although a few races were yet to be finalized at press time, it appears that the Democrats will retain control of the House of Representatives, albeit with a smaller majority. For now, it appears that the Republicans have retained the majority in the Senate, but we will not know for certain until January with both Georgia senate races apparently headed for a runoff. Having a divided Congress with very slim majorities decreases the likelihood for substantive legislative victories for credit unions.

On the Senate side of the capitol, depending on the results of the Georgia Senate runoffs, Mitch McConnell is expected to remain as the Majority Leader. However, the Republican majority could be as small as one seat. If the Democrats win both seats in the Georgia runoff, the Senate will be tied at 50/50. If that happens, Chuck Schumer is expected to be the new Majority Leader and Vice President-elect Kamala Harris will be called upon to cast tie breaking votes. In either scenario, due to slim majorities, passing legislation will be difficult.

Regardless of who controls the Senate, there will likely be a change on the Senate Banking Committee. If Republicans retain control of the Senate, it is speculated that Current Chairman Sen. Mike Crapo of Idaho will move from the Banking Committee to chair the Finance Committee and likely be replaced by Sen. Pat Toomey (R-Penn.). However, if the Democrats are in the majority, Sen. Sherrod Brown of Ohio would become the Senate Banking Committee Chairman. In either of these scenarios, the dynamics of the Banking Committee could change. On the House side, Rep. Maxine Waters (D-Calif.) is firmly entrenched as the chair of the House Financial Services Committee. Both committees can have direct impact on credit union legislation.

Legislation Outlook

For the short term, the expectation is that legislation introduced early in the next Congress will be focused on COVID-19 relief and possibly additional stimulus programs until the pandemic has subsided. This could include additional foreclosure and eviction moratoriums and reinstating other provisions in the CARES Act that will expire at the end of 2020. This will delay any meaningful legislation sought by credit unions such as data security and continuing efforts to reduce our regulatory burden. Credit unions will have to remain vigilant for any attacks on the tax exemption, as the massive spending programs in 2020 to fund COVID-19 relief will have Congress looking for new revenue sources.

One final observation about the legislative process for credit unions is that President-elect Biden has one of the most extensive legislative backgrounds of any recent president since Lyndon B. Johnson. Having this background, along with a wealth of knowledge of the legislative process and the relationships that he formed over 36 years in the Senate, could allow him to have an effective working relationship with Congress. Most of our recent presidents, most notably Trump and Obama, did not seek to form relationships with members of Congress. As a result, many of their policies after the midterm elections had to be implemented by executive orders and regulatory actions. Time will tell if President-elect Biden can turn his experience into an asset for his administration.

According to the state and national trade associations, credit unions will have many friends in the 117th Congress. While this is no guarantee for success, it is important to continue to elect legislators who understand the value of credit unions in their communities. As someone who participated in the struggle to get H.R. 1151 passed in 1998, I can assure you that the importance of building and maintaining relationships with congressional delegations cannot be understated. If you are not currently involved in credit union advocacy, find a way to be a part of this process. For the long-term stability of our industry, staying engaged with elected representatives is absolutely essential. You can bet that those who do not wish us well are already there.

Finally, we have just come through a bruising election cycle with high emotions on both sides. Hopefully, we can find ways to tone down the rhetoric and return to a place where we can work together regardless of individual political views instead of demonizing others with whom we disagree. The current path is not sustainable for the long-term benefit our country. In his first inaugural address, Abraham Lincoln implored the nation to appeal to the better angels of our nature. If only we can do that now.

Alan Stabler EVP-Chief Administrative Officer & General Counsel America’s First FCU Birmingham, Ala.