The Consumer Financial Protection Bureau’s new credit union advisory council, which met for the first time last week, seems on track to serve as a voice for the industry as the Bureau finalizes regulations required by the Dodd-Frank Act in the months ahead.
“We had the opportunity to talk about certain areas that are of importance to the Bureau, and areas where some rulemaking has already been developed, for instance in mortgages,” says Carla Decker, CEO OF District Government Employees Federal Credit Union ($48.7M, Washington, D.C.) and chairwoman of the council. “Obviously, the mortgages rule is already in its comment phase, so we spoke quite a bit about mortgages.”
“We talked about the type of mortgages we offer, the types of borrowers we lend to, the challenges we see in this market and economy. And some challenges we foresee might be unintended consequences of the rule. It really is an opportunity for us to provide the Bureau with our own opinon.”
The role of the council is to provide advice, rather than creating and pursing its own agenda, Decker says. It’s tasked with providing the CFPB feedback on matters regarding policy development, rule making and engagement efforts. So the council’s 15 credit union leaders respond to CFPB’s priorities by sharing their own experience and articulating how regulation would impact their credit union and members, rather than outlining their own objectives.
“I feel positive that this is a good opportunity for us to share our perspective, when we don’t necessarily have the same venue with other regulators,” Decker says. “That is something we should view from an optimistic perspective.”
The CFPB is the ‘new kid on the block’ among financial regulators, Mark Schmidt, managing director of Promontory Financial Group, said last week at the BAI Retail Delivery conference in Washington D.C. While the Bureau does not have direct enforcement authority over institutions with less than $10 billion in assets – which includes all but four credit unions – its regulations will certainly affect all credit unions. Schmidt calls this the ‘CFPB Effect’: Whatever examinations the CFPB enacts, other regulators will likely follow suit, implementing exams similar to what the CFPB implements.
While the CUAC serves as one conduit for the credit union voice during the rulemaking process, credit unions have a variety of other channels through which they can articulate their concerns. They may submit comments directly, or go through trade associations like the National Association of Federal Credit Unions or the Credit Union National Association, both of which have been vocal in objecting to portions of proposed regulations they believe will have unintended consequences or unfair burdens on credit unions.
In his speech for BAI attendees last week, Schmidt explained that the best defense is a good offense. He suggested that banks and credit unions start strengthening their risk management and compliance divisions with “the best and brightest.” He also recommended reaching out directly to regulators, even when not required, to keep the chain of communication going.
In a separate session at the BAI conference, Corey Stone, Assistant Director of Deposits, Collections and Credit Information Markets at the CFPB, suggested the same approach. He said that the Bureau is significantly interested in hearing from the financial community, and outlined formal and informal channels for policy-making and communication, including CUAC.
Gregg Stockdale, CEO of 1st Valley Credit Union ($36.8M, San Bernadino, CA), was one of CUAC’s first members. Stockdale, echoing Decker’s sentiments, also said early indications show that the Bureau is indeed genuinely interested in the credit union’s perspective – perhaps even more so than other regulators. Stockdale said he felt that the CFPB is sincere in its mission to hear all perspectives on its proposed rules. “They’re genuinely interested in hearing from individual institutions,” Stockdale says.
Also at its inaugural meeting, CUAC members discussed the impact of the Bureau on small financial institutions and the possibility of covered bonds before spending considerable time discussing new regulations surrounding mortgage lending.
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