Harper Calls for More Attention to Consumer Financial Protection

NCUA Chair Todd Harper on Thursday told credit union leaders that compliance with consumer financial protection laws complements the duty of financial institutions to maintain safety and soundness.

“Safety and soundness and compliance with consumer financial protection laws do not compete with one another. It’s not a zero-sum game,” Harper said at the Credit Union Leadership Convention in Las Vegas.

“Across the banking and credit union systems, the two — safety and soundness and consumer financial protection — go together,” Harper said. “And, consumer compliance isn’t just a good principle, it’s good business.

“De-emphasizing consumer financial protection in credit unions and at the NCUA carries consequences, such as serious harm to consumers, who could pay more for financial products and services, be denied a mortgage to buy a home and be blocked from wealth building. It could also lead to class action lawsuits, even for minor compliance mistakes, and reputation risk for the credit unions,” he said.

Harper’s remarks could be read as a thinly veiled criticism of CUNA and NAFCU for allying themselves with payday lenders and banks in attempts to strip the CFPB of its independence, moves that the Center for Responsible Lending has said would render the CFPB toothless.

Harper might also have been making a pitch for the NCUA to include consumer protections as criteria in its regular examinations of credit unions.

CUNA, which has long supported placing the CFPB under the traditional appropriations process, responded to Harper’s remarks by saying it doesn’t want the NCUA to have a larger role that includes consumer protections.

Alexander Monterrubio, CUNA’s deputy chief advocacy officer for regulatory affairs, said credit unions dedicate “substantial time and significant resources” to comply with laws and regulations.

“While we agree with Chairman Harper that consumer financial protection is an essential duty, our members believe overhauling [the] NCUA’s supervisory process and substantially increasing examination-related expenditures is simply not warranted,” Monterrubio said.

NAFCU has long held that credit unions should be exempt from CFPB jurisdiction and instead be regulated solely by the NCUA. It responded by saying it wants a CFPB that is clearer in its rules and more accountable for its actions.

Greg Mesack, NAFCU’s SVP of government affairs, said the CFPB’s regulatory agenda makes it hard for credit unions to reach those who need help the most.

“All we ask for is an accountable, transparent agency that is responsive to requests from the industry to provide clear rules of the road,” Mesack said. “Compliance costs continue to rise and take resources away from credit unions’ ability to serve consumers.”

The CFPB was created as an independent agency in 2010 to enforce provisions of the Dodd-Frank Act, which Congress passed to prevent abuses that contributed to the financial meltdown in 2007 that led to the Great Recession.

Mike Calhoun, president of the Center for Responsible Lending based in Durham, N.C., has said the main weapon of CFPB opponents has been to try to place the agency under direct congressional appropriations. An annual appropriation would subject the agency to riders that could restrict or prohibit enforcement of rules to the extent it no longer functions.

Removing the CFPB independence could be achieved by a bill currently in Congress, or through a ruling from a lawsuit filed by payday lenders. The Supreme Court is set to begin hearing oral arguments Oct 3.

CUNA and NAFCU support both the bill and the payday lenders’ suit.