CFPB Task Force: Allow All Credit Unions to Serve Underserved Areas

A controversial CFPB task force on consumer financial law recommended Tuesday that Congress allow all credit unions to serve underserved areas in an effort to promote financial inclusion.

“Credit unions have important potential to serve unbanked consumers,” the task force said in its two-volume, 895-page final report. “Currently, only one credit union charter type, the multiple common bond charter, can serve underserved communities outside their common-bond membership.”

It went on to say that the credit union charter types are “somewhat arbitrary.”

“The Taskforce is unable to discern a logical reason for excluding certain credit unions from serving underserved areas simply because of the terms of their common bonds,” the panel said.

NCUA board members and credit union trade groups have endorsed such plans in the past.

While credit union advocates are likely to applaud that recommendation, many of the task force’s recommendations are certain to be shelved when the Biden Administration takes over the agency. And during a conference call, no task force member addressed that political reality.

The task force also recommended that policymakers foster competition by making it easier for customers to transfer an account from one institution to another.

CFPB Director Kathleen Kraninger formed the task force last year. Consumer advocates immediately denounced the makeup of the panel, contending that it was filled with people who oppose a strict regulatory regime. Consumer groups filed suit accusing the bureau of failing to comply with federal laws that specify how such a group may be formed.

The task force released its final report the day before a hearing in that case is scheduled in federal court in Massachusetts.

The report also is filled with recommendations that a Trump Administration CFPB would likely favor, but that a Biden Administration is likely to reject.

For instance, the task force recommended that:

• States should exercise caution when setting interest rate caps when implementing regulations on small dollar credit loans. Consumer groups and many Democrats have been pushing states to set the interest rate caps to rein in payday lenders.
• The bureau should expand its use of cost-benefit analysis — a concept that consumer advocates have said can be used as an excuse for not issuing a regulation governing an issue.
• The bureau should explore the preemptive powers it has over state regulations to identify ways to provide “additional relief” from state laws hindering financial transactions in an emergency. Critics of the agency have accused Kraninger of using the pandemic as an excuse for loosening rules.