Uncertainty, Change Sweeps D.C.
Shifting NCUA board priorities and a return to the CFPB's Obama-era regulatory oversight are a few of the expected changes.
Who’s going to run the agencies?
How is the new president going to get along with Congress?
Is my job safe?
It’s enough to cause a run on Rolaids.
But this year, the continuing coronavirus crisis adds a layer that makes any predictions far more difficult – and that includes predictions about how Washington, D.C. deals with credit unions.
And while congressional committees may want to take a fresh look at how the federal government interacts with financial institutions, there may be huge changes at the two federal agencies with the most power over credit unions – the NCUA and the CFPB.
“I do think there’s a lot of uncertainty,” Carrie Hunt, NAFCU’s EVP of government affairs and general counsel, said. She added that in addition to the usual unsettled feeling, there’s an added dynamic and “that is the added uncertainty that is piled onto the fact that we have a new administration.”
“There’s going to be change in Washington and there’s considerable uncertainty about what that might look like,” Ryan Donovan, CUNA’s chief advocacy officer, said.
The year starts with turmoil at the NCUA.
President-elect Biden is likely to designate board member Todd Harper, a Democrat, as chairman. He would replace Rodney Hood, a Republican. That leaves the board with a Democratic chairman and two Republican members – Hood and new member Kyle Hauptman.
Hood, who currently sets the board agenda, loaded the December board meeting with issues that clearly reflected his priorities. The board passed a budget that Hood and Hauptman supported, but Harper opposed. The board also approved proposed rules setting overdraft policies and mortgage servicing that the two Republicans supported and Harper opposed.
The January board meeting is scheduled for Jan. 14 – the second Thursday of the month, when Hood will still be chairman. Normally, the board meets the third or fourth Thursday of the month. That falls on Jan. 21 – the day after Biden is sworn in. By then, Harper could be chairman.
“That’s something that the president can do after he’s inaugurated,” Donovan said.
“It’s very unclear what the NCUA will look like,” Hunt said, adding, “Except that January may look the same.”
To make matters even more dicey, the board, acting in private, elected Hauptman as vice chairman of the board. The December meeting was Hauptman’s first meeting as a board member.
Harper’s proposal to expand the consumer protection staff and enforcement is likely to be a flash point. Hood has opposed that proposal. “Board member Harper has a fundamentally different view,” Donovan said.
“We would argue with that,” he said, adding that CUNA opposes Harper’s plan.
Donovan said there may be a fight brewing over the NCUA’s equity ratio, which is now set at 1.38%. Harper may want to increase that, Donovan said, adding that CUNA will also oppose that.
The pandemic has ramped up the NCUA’s move to off-site examinations, as agency officials work remotely. Hunt said the agency should address how it plans to conduct examinations once the pandemic ends. “We think there needs to be more transparency as the NCUA moves toward virtual exams,” she said.
Donovan said he remains hopeful that Harper can work well with his Republican colleagues.
Harper has worked as a House staffer and director for the agency’s Office of Public and Congressional Affairs, and chief policy advisor to former Chairman Debbie Matz and board member Rick Metsger.
“I have seen Mr. Harper work with Republicans throughout his career,” Donovan said.
Then, there’s the CFPB.
In the past, the agency’s director could only be removed by the president for cause. This past summer, the U.S. Supreme Court ruled that structure is unconstitutional. Now, the president can simply fire the CFPB director at will.
Donovan and Hunt said it is not a question of if Biden will fire CFPB Director Kathy Kraninger, but when. Biden has packed the CFPB transition team with advocates of a stricter regulatory regime – something Kraninger has opposed.
But Biden will take office facing huge issues, including the pandemic and a faltering economy.
“I think the change at the CFPB is going to be significant, but I don’t know whether it will be right out of the gate,” Donovan said.
When Biden replaces Kraninger, “that certainly will have a large impact on credit unions,” Hunt said.
She said that whoever Biden chooses is likely to have regulatory priorities similar to former CFPB Director Richard Cordray, who ran the agency during the Obama Administration. She said that could lead to tighter regulation of the debt collection industry. The agency also has issued debt collection rules governing third-party debt collectors, but Hunt said a new director could expand those rules.
Hunt also said a new director may propose rules governing overdraft policies. Democrats favor tighter regulation of financial institution overdraft policies.
In addition to regulation, a new CFPB director may choose to tighten enforcement of consumer protection laws, she said. Consumer advocates have said that the agency, during the Trump Administration, abandoned strict enforcement and have been pushing the incoming administration to return to Cordray’s enforcement priorities.
The coronavirus pandemic and the economic crisis it has caused has proven to be devastating for many Americans. But Hunt said that credit unions have helped their members weather the crisis.
“Consumers have really seen how credit unions have been there for members,” Hunt said.