Op/ed: Don’t let over-regulation stifle our credit unions
By Patrick Miller
For over 100 years, credit unions have provided safe and sound lending opportunities for their members. In return, credit union members have been loyal borrowers through good economic times and bad.
The system’s size and growth in terms of membership, loans and deposits, and its consistent soundness are indicators that credit unions succeed in meeting their members’ needs. Together, credit union employees and members have created a member-owned cooperative financial system that works, with a system-wide capital ratio of over 10 percent.
However, the continuous onslaught of unnecessary regulatory rules threatens access to safe and sound lending. Regulatory proposals do not exist in a vacuum.
Every action the National Credit Union Administration (NCUA), the Consumer Financial Protection Bureau (CFPB), and Congress take has real world consequences for credit unions and their 102 million members. It is important to note credit unions are not attempting to lend irresponsibly and, in fact, have historically always been very prudent lenders. Credit union employees know their members and their ability to borrow, but that relationship is not recognized in the over 6,000 pages of regulations implemented since 2009.
Credit unions and their members acted responsibly during the economic crisis, but they continue to be unfairly penalized for the actions of too-big-to-fail financial institutions. We work every day to deliver service excellence to our members, but that cannot happen when certain statutory and regulatory barriers keep credit unions from fully serving the needs of their members. We want to work with Congress, and specifically the Financial Services Committee, to remove barriers and create opportunities, so credit unions can better server their members while continuing to practice safe and sound lending practices.
Since the beginning of the financial crisis, credit unions have been subjected to more than 190 regulatory changes from nearly three dozen federal agencies totaling close to 6,000 federal register pages. These numbers do not even take into account regulatory changes that may emanate from state regulators. Every time a rule or regulation is changed or adopted, credit unions, and thereby their members, incur costs. They must take time to understand the new requirement, modify their computer systems, update their internal processes and controls, train and oftentimes retrain their staff, design and print new forms and produce material to help their members understand each new requirement.
Even simple changes in regulation can cost credit unions thousands of dollars and many hours: time and resources that could be more appropriately spent on serving the needs of credit union members, not the desire of overzealous regulators.
Congress needs to tell regulators to stop treating credit unions like it created the financial crisis or contributed to it. Regulations have real world consequences that prevent hardworking Americans from receiving the best financial services and products they can. That is a disservice to constituents that credit unions try very hard to serve.
Constant regulatory changes present a particularly difficult challenge for small depository institutions, because the fixed costs of compliance are proportionately higher for smaller-sized credit unions and banks than for large institutions.
Congress and regulators ask a lot of small, nonprofit, financial institutions when they tell them to comply with the same rules as J.P. Morgan, Bank of America and Citibank. Almost half of the credit unions in the United States operate with five or fewer full-time equivalent employees; the largest banks likely have compliance departments that exceed that number by multiples of one hundred or more. To put the question of size in further perspective, consider that each of the four largest banks in the United States has total assets greater than the combined assets of the entire credit union system. The rules that the CFPB has promulgated so far have not taken this disparity – and disproportionate burden – into consideration as much as we feel it can or should under the law.
• Patrick Miller is President and CEO of the CBC Federal Credit Union in Oxnard.