As the Trump administration reaches the 100-day mark one thing is certain. And that’s that nothing is certain when it comes to regulatory relief for credit unions.
Regulatory changes and enforcements did fall off sharply in the first quarter of 2017, according to Continuity, a Connecticut-based provider of regulatory technology. Its Banking Compliance Index (BCI) recorded just 57 enforcement actions, far below the average of 157 since the index began in 1Q 2013.
The company also issues a BCI score, in which 1.0 means one FTE is needed to read, process, and comply with that quarter’s regulatory changes. In the first months of the Trump era, the score fell to .79, the first time it’s dipped below 1.0, again since it was first published in 2013.
Maybe the regulatory freeze has had an effect, says Donna Cameron, director of regulatory I/O at Continuity, but so have new and unfilled leadership positions at the FDIC and OCC and the uncertain fate of the CFPB.
The NCUA also needs a third board member and the agency itself remains an apple in some lawmakers’ eyes who would like to bring the agency’s actions, and that of every other major financial regulator, directly under the congressional thumb. That’s a component of the Financial CHOICE Act now before Congress.
Making Some Noise
As for the first 100 days, Cindy Williams doesn’t disguise her disappointment. “Regulatory compliance has not been the priority many had hoped it would be. There has been no regulatory relief, no major regulatory repeals, no changes that have significantly impacted credit unions,” says the vice president of regulatory compliance at the PolicyWorks consultancy in Des Moines, IA.
“What we’ve seen so far is pretty much status quo, and I expect to see more status quo for a while. It takes a while to effect change,” Williams says. “Credit union advocates need to continue to make noise, talk about the need for reform and relief, and be active conversation starters and participants to keep attention on the topic.”
Not that there hasn’t been any activity. "In his first 100 days in office, President Trump has been active in publishing executive orders that seek financial regulatory reform, which NAFCU sees as generally favorable for credit unions and their members,” says Alexander Monterrubio, director of regulatory affairs at NAFCU.
That includes ordering Treasury Secretary Steven Mnuchin to meet with agency heads to solicit industry feedback on regulations they deem most burdensome, Monterrubio says. “That executive order also spurred a recent meeting of Treasury staff with NAFCU and several of our members, where we had the opportunity to outline several rules that adversely affect credit union members, such as the Qualified Mortgage and Risk-Based Capital rules,” the NAFCU director says.
Monterrubio says NAFCU is now looking for Trump to pay more attention to legislative reforms such as the Financial CHOICE Act, “especially if there is no traction on tax and health care issues."
The View From Stateside
Pat Keefe, vice president of communications for NASCUS, says the regulatory freeze has had a noticeable effect even at independent agencies like the NCUA. “They complied in spirit,” he says.
Keefe also pointed to the executive order that led to the Mnuchin meeting. That mandate to seek ways of “restoring public accountability within federal financial regulatory agencies” and “rationalizing the federal financial regulatory framework” could be very helpful in fostering greater transparency at federal agencies, including NCUA, the NASCUS spokesman says.
“NASCUS and the state systems have been pushing for such transparency – particularly with regard to the overhead transfer rate – for nearly two decades,” he says.
“For example, the agency’s response to last year’s comment period on the overhead transfer rate has yet to be issued, something we urge the agency to do soon,” Keefe says, adding that the regulatory freeze has ended, and that could set free a backlog of federal action.
Everyone is just holding their breath. It's difficult to plan with all this uncertainty.
Will Backlog Meet Choice?
Technically, the regulatory freeze is over and the state system is anticipating the loosing of a backlog of federal agency action.
Keefe says NASCUS hopes that will include the NCUA’s response to last year’s comment period on the overhead transfer rate.
And Cameron at Continuity pointed to much more. She says that while new CFPB rules on payday lending and arbitration, for instance, might be snuffed by Congress, there are still rules around HMDA, mortgage servicing, prepaid accounts, and the Military Lending Act that could affect credit unions and the people who examine them.
And then, there’s the Financial CHOICE Act, the effort in the GOP-controlled House to replace the Dodd-Frank Act. Brad Thaler, NAFCU vice president of regulatory affairs, says the measure “should see fairly swift action” in the House Financial Services Committee and could come before the full House soon.
“On the Senate side, Senate Banking Committee Chairman Mike Crapo (R-ID) has initiated his own process to craft a package that can get bipartisan support,” Thaler says.
Of course, any final regulatory reform package would have to clear both chambers and then be signed by the president. And that’s in addition to all the pent-up energy at the regulatory agencies, wondering who’s in charge, or will be, what’s next, and what’s coming.
“Everyone is just holding their breath,” says Cameron at Continuity. “It’s difficult to plan with all this uncertainty.”