Senate Passes Sweeping Regulatory Reform Bill

The Senate on Thursday passed the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act—the comprehensive financial reform bill that Congress has been working on for over a year.

The Senate on Thursday passed the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act—the comprehensive financial reform bill that Congress has been working on for over a year.  The Senate action clears the way for the legislation to be signed by President Obama.

The credit union system ultimately opposed the bill that CUNA and the Leagues across the nation had been working for several months to change.

First among credit union concerns is the interchange provision that was added to this bill by the Senate in May.  This provision was not a part of the administration’s original regulatory restructuring proposal, and was not subject to hearings or a comprehensive debate.  Credit union grassroots and lobbying efforts failed to remove this provision from the legislation. However, because of those credit union efforts, significant improvements were made to this provision. 

These improvements, while they certainly do not make the entire bill palatable, will give credit unions a better chance at convincing the Federal Reserve to set an interchange rate that would accurately reflect the true costs to credit unions, than they would have had if the system had not taken the action it did in June, according to CUNA.

Given all of the focus on interchange, it is very easy to overlook the fact that there are several hundred other provisions in this legislation — most of them aimed at ensuring that the events and activities that caused the financial crisis cannot happen again.  Many of these provisions will have no direct impact on credit unions. Other provisions though, including the proposal to create the Bureau of Consumer Financial Protection, will affect credit unions.

Over the course of the last year, CUNA and the Leagues have been relatively successfully working to ensure that when this legislation becomes law, the adverse impact on credit unions is minimized. Successes include:

  • Credit unions with less than $10 billion in total assets will not be subject to examination and enforcement by the CFPB, except on a sampling basis or when significant consumer complaints have been reported.
  • There is no plain vanilla product requirement.
  • The deposit account data collection provision has been removed.
  • Credit unions will not pay for the new consumer bureau.
  • The legislation, thanks in very large part to our efforts, includes provisions directing the CFPB to take into consideration the impact of its regulations on credit unions and to identify and address outdated, unnecessary, and unduly burdensome regulation in an effort to reduce regulatory burden.
  • The preemptive authorities of the Federal Credit Union Act remain unchanged.
  • The Financial Stability Oversight Council, the group of banking regulators that have the authority to review, stay and set aside CFPB regulations, includes credit union representation.
  • The CFPB has no authority to regulate the Community Reinvestment Act.

The legislation also includes provisions related to share insurance (making permanent the $250,000 insurance coverage level), remittances, and access to mainstream financial institutions that will present opportunity and challenges to credit unions.  We have been working on these issues during the legislative process and we will continue to work on these issues as this legislation moves to the regulatory process.