CUNA/league witness: ‘Alarming’ disappearance of small FIs

November 9, 2015

LAS VEGAS (11/9/15)--Regulatory burden is causing small financial institutions to disappear at an “alarming rate” a CUNA/Nevada Credit Union League witness told a U.S. House subcommittee last Friday.

During a field hearing hosted by the House Small Business subcommittee, Robin Simmers, CEO/manager of Pahranagat Valley FCU, Alamo, Nev., described a life under a “crisis of creeping complexity with respect to regulatory burden.”

Pahranagat Valley serves roughly 2,000 members and has six full-time employees, including Simmers.

“Running a small credit union, which is also a small business, presents a variety of challenges. With a team of six, I am not only the CEO and manager, but I serve as the teller, CFO, COO, HR department, business lending officer, mortgage loan officer and everything in between,” she said. “Since 2011, our credit union is the only financial services provider for our small town.”

While the post Dodd-Frank Act regulatory burden has been stifling for small institutions such as Pahranagat Valley FCU, Simmers said Congress can and should restore credit unions’ authority to lend to their small business members.

“No economic or safety and soundness rationale has ever been established for why credit unions should be subjected to a cap on small business lending,” she said. “We believe Congress should fully restore credit unions’ ability to lend to their small business members, as they did without statutory restriction until 1998.

“While the small banks were asking for taxpayer money to lend to small businesses, credit unions were pleading with Congress to permit well-capitalized credit unions with a strong history of business lending to lend beyond the arbitrary cap on business lending that is in statute,” she added.

When asked for ideas, Simmers suggested an advisory committee should be assembled to see how the final outcome would affect institutions of all size.

She also suggested that regulatory comment periods are not effective for small financial institutions because a CEO like her, who wears multiple hats, will not likely have the time or expertise to meet a 30- to 60-day window.

Other suggested changes include:

  • Treating one- to four-family non-owner occupied residential loans as residential loans, not credit union business loans;
  • Improving credit unions’ ability to offer Small Business Administration and other government-guaranteed loans by exempting those loans in their entirety from the member business lending cap; and
  • Considering comprehensive reforms to credit union capital structure, including authorizing the National Credit Union Administration to define what the different net worth levels must be in order to be “well-capitalized,” “adequately capitalized,” “undercapitalized” and “significantly undercapitalized.”

Summers also reiterated CUNA and league support for legislation that would provide transparency for the NCUA’s budget; install a five-person board to run the Consumer Financial Protection Bureau (CFPB); require a cost-benefit analysis of all CFPB proposals; codify the bureau’s Credit Union Advisory Council; provide a hold-harmless period for the Truth in Lending Act-Real Estate Settlement Procedures Act integrated disclosures act; and create an independent examination ombudsman.