Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in July in the wake of the most serious financial crisis in 70 years.
Its intent was to reform abusive financial practices, particularly with mortgage lending and systemic risks, and provide marketplace stability. The bill specifically addresses leverage ratios for systemically important financial institutions, enhanced supervision for bank and thrift holding companies, and a new consumer bureau with broad authority over consumer regulations, products, and services.
But the new law probably raises more questions than it answers: Is it the correct prescription for an ailing financial system? How effectively does it overhaul government oversight of the banking system? Will it prevent another crisis?
Historians, economists, and politicians will debate those questions for generations. Credit unions, on the other hand, have more immediate concerns. They want to know how the new law will affect their operations, and how significantly it will increase their regulatory burden.
Nestled in the bill’s 2,300 pages are more than 240 new rules. The good news for credit unions—if you can call it “good news”—is that only about 35 of the new rules will pertain to them, says Mary Dunn, senior vice president and deputy general counsel for the Credit Union National Association (CUNA), adding “we’re also reviewing changes to existing laws.” Still, there’s no question credit unions should brace for increased compliance responsibilities.
The law is complex, the language is vague, and the regulatory process itself is just beginning, Dunn cautions. But for now, here’s an overview of the top provisions affecting credit unions.