WASHINGTON (1/28/16)--Regulatory overlap, along with differing agendas from different federal regulators, will bring additional compliance burdens to credit unions in 2016, particularly two proposals from the U.S. Department of Labor (DOL).
The Credit Union National Association (CUNA) wrote to National Credit Union Administration Chair (NCUA) Debbie Matz Wednesday highlighting concerns about the DOL’s proposed rules regarding the definition of “fiduciary” and overtime pay.
CUNA believes these rules will “be unduly burdensome to credit unions if finalized this year,” and is particularly concerned by the detrimental impact these rules will have on credit union members.
“We urge the NCUA to encourage the DOL to analyze further the problems this rule will create for credit unions, and more narrowly tailor its proposal for overtime pay to include a more reasonable percentage of the workforce,” the letter reads. “Additionally, the DOL should consider the burdens this rule could place on small credit unions and those in rural and underserved areas.”
The DOL has said it plans to finalize its fiduciary rule in the first half of 2016. The proposal would define who is a “fiduciary” of an employee benefit plan, which includes adding brokers and advisers providing advice to individual retirement accounts.
While CUNA supports the broader goal of protecting investors and encouraging advisers to act in the investor’s best interest, it believes the DOL’s proposal will leave credit union members with “fewer options and more confusion.”
“This [rule] could preclude credit unions from offering investment services through a third party, which is not in the best interest of credit union members or middle-class families,” CUNA’s letter reads. “We believe it is important for the DOL to more narrowly tailor the definition of ‘investment advice’ to ensure the rule does not cover interactions of credit union employees, who are only tangentially involved in providing these services.”
CUNA also notes that the proposal, in its current form, creates regulatory overlap--a concern shared by other regulators including the Financial Industry Regulatory Authority and the Securities and Exchange Commission. The Small Business Administration has also expressed concerns.
The DOL has also said it will likely release its overtime rule this year, raising the salary threshold to be eligible for overtime pay to the 40th percentile, moving the threshold to $50,440 from the current $23,660.
“In the case of credit unions, the rule does not take into consideration the significant increase in costs credit unions are facing because of recent changes in the regulatory environment,” CUNA’s letter reads. “So many credit union employees suddenly will be covered under this rule that we worry credit unions will find it extremely difficult to find the extra resources to rapidly come into compliance with it, as opposed to if the DOL took a more incremental and measured approach to modifying the standards.”