New Legislation Aims to Lighten Regulatory Burdens for Credit Unions

In June 2013, Vice Chairman of the House Financial Service Committee Rep. Gary Miller (R, CA-31) introduced legislation to address the increased regulatory burdens that are impeding credit unions from serving their local communities. The Regulatory Relief for Credit Unions Act of 2013 (H.R. 2572)  is intended to ensure that consumers are able to access financial products in a safe and sound manner while instituting common sense reforms for credits unions that will allow them to better focus their resources on their members.

The Regulatory Relief for Credit Unions Act of 2013 is seen as a response to the increasing regulatory burden facing credit unions since the passage of the Dodd-Frank Act in July 2010.  This burden has greatly increased recently with the new rules promulgated by the Consumer Financial Protection Bureau (CFPB).  While credit unions are not held responsible for the recent financial crisis, they are still required to comply with all regulations that are applied to the largest banking institutions.  Credit unions are currently operating in a climate where many credit unions may have only one employee to address compliance issues.

The Regulatory Relief for Credit Unions Act would:

• Allow the credit union’s prudential regulator, the National Credit Union Administration (NCUA), to grant federal credit unions a waiver to follow a state rule instead of a federal one in certain situations;
• Establish a risk-based capital system for credit unions akin to that of other depository institutions;
• Authorize the NCUA to step in where appropriate to delay application of, or slightly modify, a CFPB rule affecting credit unions to be sure such a rule recognizes the unique nature of credit unions while also carrying out the intent of the CFPB;
• Require that NCUA and CFPB revisit cost/benefit analyses of rules after three years so they have a true sense of the compliance costs for credit unions;
• Require the NCUA to conduct a study of the Central Liquidity Facility for credit unions and make legislative recommendations for its modernization;
• Provide credit unions parity with FDIC-insured institutions when it comes to deposit insurance coverage on Interest on Lawyers Trust Accounts (IOLTAs); and
• Give credit unions better control over their investment decisions and portfolio risk.

See June 28 Press Release “Rep. Gary Miller Introduces Bill to Relieve Credit Unions from Mounting Federal Regulatory Burdens”: http://garymiller.house.gov/news/documentsingle.aspx?DocumentID=341104.

The purpose of the new legislation is sound.  Credit Unions are simply not situated to undertake the massive costs and burdens needed to successfully comply with myriad federal regulations that have been instituted over the past few years.  No doubt credit unions will be following the course of this new legislation very closely.