Carrie Hunt Says Regulators Are Challenging the CU Business Model

Two letters. Two regulators. Two fronts attacking the credit union business model, according to America’s Credit Unions.

Since taking the position earlier this year, America’s Credit Unions Chief Advocacy Officer Carrie Hunt has not been shy about her and the organization’s thoughts on the challenges placed on credit unions by the CFPB and NCUA.

On Thursday, Hunt filed letters addressed to the heads of both the CFPB and NCUA to express what she calls an “unprecedented battle” happening within the industry due to the stance by both agencies on items such as non-interest income, overdraft fees and credit card fees, which “will result in a change to the credit union business model, making it more difficult and costly for these smaller, community-based institutions to continue serving their consumer-members across the country.”

In the letters to CFPB Director Rohit Chopra and NCUA Chairman Todd Harper, Hunt stated the objections to the two organizations continuing to head down the regulatory road to decrease credit unions’ ability to collect fees, such as overdraft (OD) or non-sufficient funds (NSF) fees.

While the CFPB issued a final rule in March to reduce credit card late fees from $32 to $8, for which a judge has since issued a preliminary injunction, the NCUA has not made any formal regulations to reduce fees. Although, the NCUA does now require credit unions with more than $1 billion in assets to report OD and NSF fees in the Call Reports; a requirement America’s Credit Unions objects to. Additionally, Chairman Harper has recently advocated for credit union officials to reduce their overreliance on OD and NSF fees.

“The Bureau has recently proposed or finalized several regulations that would reduce credit union income while simultaneously increasing regulatory burdens and compliance costs, acting as a one-two punch to the operational realities of credit unions,” Hunt wrote.

“The decreased fee income associated with these regulations — combined with increased regulatory burdens simultaneously implemented by the Bureau — have put significant pressure on the ability of credit unions to remain competitive and offer crucial programs and services to their members,” the letter stated.

Hunt stated the continued pressure of the regulations will encourage the continued shrinking of the credit union industry. “If unnecessary regulation continues to make it more difficult for smaller financial institutions to operate, we will continue to see an increasing rate of consolidation, resulting in fewer banking options, less competition, and higher prices. We will also see the costs of basic financial services increase to compensate for the loss of non-interest income. This means no more free checking accounts, more expensive loan products, and less staff available for that individual support that is critical for so many credit union members.”

The letter continued, “Unfortunately, overregulation and attacks on products that provide necessary income to financial institutions, such as mis-characterizing avoidable and clearly disclosed fees as ‘junk fees,’ are making it harder for credit unions to survive. It is not one single action that ultimately overburdens credit unions, but rather it is the tidal wave of regulations and restrictions that are ultimately crushing the industry.”

Hunt also stated her objections to the increases in the NCUA’s operating budget and said that is putting even more pressure on credit unions.

“Given that credit unions fund the NCUA, similar to a reduction in non-interest income, an increase in the agency’s budget effectively means a reduction in credit unions’ resources and an increase in pressure to comply with regulatory requirements. This ultimately makes it more difficult for credit unions to serve their members,” Hunt wrote.

The NCUA’s overall budget for 2024 is $385.7 million and was approved by the Board in December. It reflects a 7% increase over the 2023 budget.