On Friday, December 1st, the House passed a resolution of disapproval regarding the Consumer Financial Protection Bureau’s (CFPB) rule for Section 1071 of the Dodd-Frank Act, which would require credit unions to collect and report data on specific applications for credit. Namely, applications from female-owned, minority-owned, or small businesses.
Passed back in March, the rule has received much criticism, with opponents citing that it would not only raise costs for the credit unions that need to collect this data but also require significant amounts of time from staff members to do so, with ultimately little value for said effort.
Credit union advocacy groups such as CUNA and NAFCU have consistently expressed their disapproval of the rule and have worked to prevent it. CUNA expressed concern over “the potential for unintended consequences and substantial costs of compliance associated with the creation of a broad data collection where one does not currently exist.”
In hopes of stopping the rule, CUNA, Cornerstone League, and Rally Credit Union in Corpus Christi, Texas, took the matter to court, where they were successful, resulting in a nationwide stay of the rule for all covered entities. Furthermore, at the end of November, CUNA and NAFCU submitted a joint letter to Congress in support of the resolution of disapproval.
In addition to the above complaints, the groups argued that the intent of the Dodd-Frank Act and the creation of the CFPB were meant as a means to supervise and regulate banks that were too big to fail after the 2008 financial crisis. The letter continued to say that credit unions do not fall under this category and that the CFPB should keep its focus on less regulated institutions.
“Credit unions remain one of the most heavily regulated entities in the country, even though they did not engage in the anti-consumer practices that caused the financial crisis,” the letter notes. “Despite our pro-consumer history, credit unions have repeatedly been lumped in with others through the promulgation of overly broad rulemakings, increasing compliance costs without a material benefit for consumers.”
In response to Friday’s passing, Jim Nussel, CEO/President of CUNA stated, “We thank Congress for recognizing that, while this rule may be well-intentioned, its real-life impact will harm the small business borrowers and consumers the CFPB aims to protect. The overly broad scope of this rule would lead to higher costs for covered financial institutions and small businesses around the country, which is why credit unions continue to push back against this rule wherever possible.”
The resolution for disapproval was passed in the Senate in October. Now that it has passed in the House, it will head to President Biden’s desk for final approval. However, it is expected that the President will veto it.