The great philosopher Billy Crystal is quoted as having said, “Change is such hard work.”
If that’s true, folks in the credit union community are in for a tough year.
From the hallways of trade groups to the meeting rooms on Capitol Hill and to the offices of credit union regulators, the regulatory, legislative, and political environment is changing.
As usual, with change comes some fear and some opportunity. Here is a roundup of changes credit unions can expect in our nation’s capital this year.
America’s Credit Unions
The first big change occurred on January 1, when the merger of the two national credit union trade groups, the Credit Union National Association and the National Association of Federally-Insured Credit Unions became official.
CUNA President/CEO Jim Nussle became president/CEO of the new trade group, America’s Credit Unions.
On the legislative front, the new group’s chief advocacy officer, Carrie Hunt, is a familiar face on Capitol Hill. Before joining the Virginia Credit Union League as its president/CEO, Hunt served as executive vice president of government affairs and general counsel at NAFCU.
In a recent conference call with reporters, Jason Stverak, a regulatory spokesperson for the new trade group, promised “uninterrupted advocacy.” Stverak was the deputy chief advocacy officer at CUNA. Nussle, for his part, immediately sent a letter to Capitol Hill and new NCUA board member Tanya Otsuka outlining the new group’s priorities.
More on that later.
As part of the merger of the two groups, CUNA’s and NAFCU’s Political Action Committees are merging.
The merged PACs could have an impact on credit union PAC contributions since there are limits on how much each PAC may contribute to a single candidate. Congressional candidates who are used to receiving contributions from both PACs now will only receive money from the one merged PAC.
Tanya Otsuka was sworn in as a National Credit Union Administration board member on Jan. 8, replacing Rodney Hood, whose term had expired. It gives the Democrats control of the NCUA board, with Kyle Hauptman remaining as the only Republican member.
With Democrats now controlling the board, Chairman Todd Harper could have the votes to gain approval for several of his initiatives, particularly an increased focus on consumer financial protection.
Otsuka may see things Harper’s way, giving him the additional vote he needs to re-examine priorities.
Fearing that, Nussle immediately sent a letter to Otsuka, asking that she oppose Harper’s consumer protection proposals.
“We urge the agency to refrain from needlessly increasing its focus and expenditure of resources on activity related to consumer protection without sufficient reason to do so,” the new trade group’s President/CEO Jim Nussle wrote in a letter to Otsuka last week. “Altering the agency’s risk-focused examination process and substantially increasing consumer examination-related expenditures to establish a mini-CFPB within the NCUA is simply not warranted.”
Otsuka also could side with Harper on climate-related issues. The NCUA board has solicited public comment on how climate issues affect credit unions. Several l financial regulators have gone further and issued guidance on how climate-related problems affect financial institutions. Otsuka could shift the balance of power on this issue.
It is likely to be an eventful year at the CFPB.
The CFPB’s very existence could be in jeopardy. The U.S. Supreme Court is likely to issue its decision on the agency’s funding mechanism in June 2024. The Consumer Financial Services Association of America has challenged the CFPB’s funding mechanism, contending that it is unconstitutional since the CFPB is not subject to the annual appropriations process. Instead, the CFPB is funded by the Federal Reserve. If the Supreme Court rules that the funding structure is unconstitutional, it could call into question all the agency’s rules and enforcement actions since the bureau was established in the Dodd-Frank Act. This, obviously, would impact financial institutions in unpredictable ways.
Nonetheless, the agency is widely expected to issue a proposed rule governing overdraft programs at financial institutions, much to the chagrin of financial institution trade groups.
Many observers had expected the agency to issue the rule before Christmas, but that timetable has slipped. Financial services trade groups are outspoken opponents of any proposal that would restrict overdraft programs. Most recently, the Consumer Bankers Association launched a new website, overdraftfacts.com, to argue that the CFPB proposal will be misguided.
“Overdraft services are conveniently linked to a checking or savings account and offer a bridge to cover a purchase or expense like a recurring bill when you do not have the needed cash on hand,” the CBA argued on the website. “For many consumers, this optional service delivers financial flexibility to cover an unexpected expense and the certainty of knowing important transactions, such as rent or utility payments, will not be declined.”
A progressive government watchdog group immediately attacked the financial services trade groups for their pre-emptive attacks. “Lobbyists for big banks, credit card companies—and Congressional Republicans in their pocket—will say or do anything to keep price-gouging everyday Americans with hidden junk fees that serve no purpose other than [padding] profits,” said Liz Zelnick, director of the Economic Security and Corporate Power Program at Accountable.US.
Financial services trade groups also criticized the overdraft issue from another angle. The groups, including America’s Credit Unions, warned Chopra that before an overdraft proposal is released, the agency must conduct a detailed analysis of the plan’s impact on small businesses.
That review must include the convening of a panel of small financial institutions that would be affected by the rule, the groups wrote in a letter to Chopra.
Financial services trade groups also have asked the bureau to abandon its proposed rule making it easier for consumers to obtain their personal financial information. In a letter written prior to the merger of the two credit union trade groups, NAFCU and CUNA said that the proposal goes far beyond what is called for in the Dodd-Frank Act.
Congress has already made one decision about the CFPB this year. The Senate earlier this month failed to override a presidential veto of a rule that requires financial institutions to report their lending activity to the agency.
The Senate failed to override the veto of S. J. Res. 32, by a 54-45 vote. The resolution to void the rule was sponsored by Sen. John Kennedy, D-La., who was blunt in his criticism of the agency.
“If you ever want to understand why the American people hate the Federal Government, just look at the output of the CFPB,” he said. “I mean it. Common sense is illegal there.”
He added, “If you believe in fairness, if you believe in privacy, if you believe in the freedom of the American people, if you have taken your meds today, if you have any semblance of common sense left, you will see that this proposal by President Biden is like a rock, only dumber.”
However, the vote does not mean that the rule goes into effect. A Texas federal judge has blocked implementation of the rule until the Supreme Court decides on the constitutionality of the CFPB’s funding mechanism.
Then, there’s Congress. Since 2024 is an election year, and given the close partisan divide in each house, it may be difficult for Congress to accomplish much this year.
Supporters of interchange legislation will be searching for opportunities to add the proposal to must-pass FY24 spending bills, according to Greg Mesack, who previously served as senior vice president of government affairs at NAFCU and is now another regulatory spokesperson with America’s Credit Unions. America’s Credit Unions and other financial trade groups will be trying to stop them.
The interchange bill, S. 1838, is being championed by Sens. Richard Durbin, D-Ill., and Roger Marshall, R-Kan. It would require the Federal Reserve to issue rules that guaranteed that large credit unions and banks currently using the four-party card processing system be required to use at least one affiliated network in addition to VISA and Mastercard.
On the House side, the Financial Services Committee is in store for some big changes. Financial Services Committee Chairman Rep. Patrick McHenry, R-N.C., has announced he will not seek another term in the House. That means that depending on how the election turns out, Republicans will be searching for either a new chairman or a new ranking member on the panel.
Rep. Blaine Luetkemeyer, R-Mo., considered to be one of the frontrunners for the GOP leadership position, also has announced his retirement.
Three House Republicans are considered candidates for the top Republican spot on the panel. Rep. French Hill R-Ark., who now serves as the Financial Services Committee’s vice chairman and as the chairman of the Digital Assets, Financial Technology, and Inclusion Subcommittee, is a likely candidate. Earlier in his career, Hill served as the president/CEO of the Delta Trust & Banking Corporation in his home state. Rep. Bill Huizenga, R-Mich., also is considered a likely candidate. He now serves as the chairman of the panel’s Oversight and Investigations Subcommittee. He is the co-owner of his family’s gravel company. Finally, Rep. Andy Barr, R-Ky., may seek the top Republican spot. He is chairman of the committee’s Financial Institutions and Monetary Policy Subcommittee and is an attorney.
On the Senate side, Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, is running for reelection, in one of the key races that could determine which party controls the Senate next year. Brown can be expected to continue to push a consumer protection agenda this year, in an effort to burnish his image as a champion of the working class.