Moving the Needle in 2023

Every year brings about new unique opportunities and challenges facing credit unions. While the industry pushes for innovative ways to better serve their communities, one thing remains unchanged: NAFCU's unwavering advocacy to protect and promote the credit union way and the 134 million Americans they serve. As always, our focus, from both a legislative and regulatory standpoint, is directed heavily by credit unions' needs. Below are NAFCU's 2023 advocacy priorities to ensure those needs are met and that credit unions continue to be the best option for affordable and accessible financial products and services.

Growth

A key component of our priorities with Congress and federal regulators is to make sure credit unions can grow and thrive to strengthen how they serve their communities. Part of that priority is to engage the NCUA to create a flexible and right-sized regulatory environment, one where credit unions are equipped with the tools to be successful and protected from threats that could stifle their growth, including big banks.

Big banks have long drawn out the battle over the credit union tax exemption. Time and time again, we've set the record straight on how this exemption boosts the national economy and promotes the financial success of credit unions' members and Main Street businesses.

As banks continue to abandon communities, especially those in need of financial services, NAFCU continues to push for field of membership reform. Allowing credit unions to fill these gaps will uplift underserved communities.

Earlier this year, I met with Rep. Maxine Waters (D-Calif.) to underscore credit unions' desire to help these communities by serving as Community Development Financial Institutions (CDFIs). The CDFI Fund is attempting to make some concerning changes to its certification and application process. NAFCU has called for more clarity and transparency from the fund to ensure credit unions are not forced out of the program. With the help of our credit union members, we secured additional CDFI funding as well as report language in the omnibus spending package passed late last year, which directs the CDFI Fund to engage stakeholders with its new application process.

Technology and Innovation

NAFCU believes that credit unions need a clear regulatory framework that allows them to implement these developments to improve member services, while also providing appropriate protections and oversight of unregulated entities in this space. The industry has seen remarkable technological growth over the past several years as it embraces fintech partnerships and innovative solutions. There are also significant developments happening in the payments space. We recognize the benefits of blockchain technology and faster, real-time payments, including the NAFCU-supported FedNow program – a secure and cost-effective real-time payments platform, which is expected to launch sometime this year.

This year, we'll closely watch legislative efforts related to digital assets and cryptocurrency. Congress is expected to continue discussions on a central bank digital currency (CBDC). We've shared concerns with lawmakers and regulators about the creation of a CBDC, arguing that the costs outweigh the benefits and that credit unions represent a superior and safer alternative for advancing financial inclusion goals and promoting affordable access to payments.

Fair Market

Critical to technology and innovation within financial services is a fair market and ensuring all entities are held to the same regulatory standards. As we've seen lately, the rise of fintechs and unsupervised non-depository financial institutions has uncovered several weak points in supervision and consumer protection.

Part of that solution is legitimate liability related to fraud and error resolution responsibilities. The CFPB last year left many institutions in suspense as it indicated it would revise Regulation E provisions. NAFCU has warned the bureau that shifting liability for fraud-induced, consumer-authorized transactions stretches the bounds of the Electronic Funds Transfer Act and would make credit unions and other financial institutions more vulnerable to fraud related losses.

Data Protection

One area ripe for reform to ensure a level playing field is data security and privacy. The rise in new technologies and information sharing has reinforced the need for a comprehensive federal data privacy standard. Credit unions successfully comply with the security and privacy requirements under the Gramm-Leach Bliley Act (GLBA); other non-bank entities should, too. NAFCU is urging lawmakers to follow their stead and reform the nation's data security system, especially for fintechs. It is also imperative that when it considers national data security legislation, Congress provide a uniform national standard, replacing the current patchwork of state laws.

Additionally, the CFPB issued an outline of proposals to implement Section 1033 of the Dodd-Frank Act, which aims to provide a formal mechanism for making consumer data portable, taking the next step in issuing a financial data rights rule.

As it stands, the proposal presents significant challenges for credit unions. With the alarming rise of data breaches among under-regulated fintechs, we urge the CFPB to provide appropriate judgement and supervision prior to granting third parties access to consumer data. It is also imperative that the bureau recognize the scope of implementation – not adding compliance costs and burdens for credit unions, which could lead to an unfair playing field with fintechs.

Regulatory Relief

Central to our other four advocacy tenets is regulatory relief. A strong and engaged NCUA is necessary to maintain the safety and soundness of the credit union industry – but that does not mean weighing credit unions down with outdated and burdensome compliance requirements. In some of its recent rulemakings, the NCUA has taken a principles-based approach. NAFCU urges the agency to adopt this same mindset in all of its rulemaking efforts, including those related to credit unions' permissible interest rate ceiling. In addition to the NCUA, we continue to work with the CFPB to secure relief for credit unions, underscoring their unique structure and mission. Unfortunately, we have seen the bureau operate outside its statutory scope and without sufficient data and justification on multiple occasions. In early February, the CFPB issued a proposal on credit card late fees that would drastically reduce the safe harbor amount.

While the bureau argues this will save consumers money, it fails to recognize that this misplaced rulemaking would likely force out smaller, community-based institutions like credit unions, many of which provide much needed lines of credit for underserved communities. Additionally, the bureau's own data shows the vast majority of Americans pay their credit card bills on time and wouldn't actually see any cost savings as a result.

NAFCU isn't the only group questioning the CFPB's regulatory strategy. Lawmakers, including House Financial Services Committee Chairman Patrick McHenry (R-N.C.), have expressed disdain for the bureau's regulatory enforcement strategy. McHenry and I sat down at the beginning of his chairmanship to discuss a competitive and robust financial marketplace that is fair and provides regulatory clarity for credit unions, especially from the CFPB.

Looking Ahead

These priorities are only a quick glimpse of what's ahead for NAFCU's advocacy efforts in 2023. In my more than 25 years of advocacy and government affairs experience, I have never seen an industry as passionate and as invested in their communities as credit unions. NAFCU will continue to be your voice in Washington and make sure credit unions continue to thrive and properly compete alongside big banks and fintechs. We will keep up the good fight to make sure you have everything you need to serve your members.