WASHINGTON (4/6/16)--Committee members and witnesses alike had concerns over regulatory burden’s effect on the financial services marketplace for consumers during a Tuesday hearing conducted by the U.S. Senate Banking Committee. The Credit Union National Association (CUNA) submitted a letter for the record of the hearing, a letter that highlighted results of its comprehensive regulatory burden study.
CUNA’s study, conducted with Cornerstone Advisors, found that in 2014 alone the cost of regulatory burden on credit unions was $7.2 billion.
During the hearing, both witnesses and legislators discussed how over-regulation is having the opposite of its intended effect in some cases, making it harder for un- and underbanked consumers to access services they need, and forcing them to turn to less regulated nonbank providers.
Witness Todd Zywicki, a professor of law at George Mason University, described himself as an early proponent of the Consumer Financial Protection Bureau (CFPB). He said Tuesday that Dodd-Frank and the CFPB have “squandered an unprecedented opportunity” to modernize the consumer credit system.
“Instead, the post-crisis regulatory framework has resulted in higher prices and reduced choice for consumers and little improvement in consumer financial protection. Indeed, by stifling competition and driving millions of Americans out of the mainstream financial system, it may actually result in more consumer protection problems,” he said, adding that consumers without access to mainstream financial services often turn to methods such as payday lending to obtain funds.
Sen. Dean Heller (R-Nev.) said he spent the Senate’s most recent recess talking to lenders in his state, and said the comments he got from them are likely similar to those around the country. Lenders told Heller about the need to hire numerous compliance officials, how they stopped originating mortgages due to burdensome new regulations.
“In Nevada we have half as many credit unions and community banks as we did five years ago. Those are pretty stark messages.
Witness Leonard Chanin was asked by Heller about the CFPB’s exemption authority, and whether it could be used to exempt credit unions and community banks from some regulations.
Chanin authored CUNA’s legal opinion on the bureau’s exemption authority.
“The CFPB has a great many authorities in the Dodd-Frank Act, under the statute itself and for each individual law that it implements, like the Truth in Lending Act, Equal Credit Opportunity Act, etc. it has separate authority to makes exemptions,” he said. It has a great deal of authority to either exempt small institutions from some of the requirements or all of the requirements, assuming there is evidence that shows that institutions, by complying, would not make credit available to consumers. So there is a test they have to use before they create an exemption.”
For a deeper look into Tuesday’s hearing, see CUNA’s Removing Barriers Blog.