NASCUS Discusses CU Impact of Dodd-Frank and Compliance Considerations with GAO

April 19, 2012 - The U.S. Government Accountability Office (GAO) contacted NASCUS for feedback on the impact of the Dodd–Frank Wall Street Reform and Consumer Protection Act (DFA) on credit unions. NASCUS met with GAO on April 17 to discuss the DFA and the general regulatory and compliance landscape impacting credit unions.

The GAO is focusing its impact analysis on community banks and credit unions with less than $10 billion in assets. As you know, a number of DFA provisions exempt financial institutions with less than $10 billion in assets. However, while Congress intended certain exemptions for smaller institutions, NASCUS informed GAO that the credit unions were not necessarily spared from impact of the comprehensive law.

For instance, the CFPB now governs all consumer financial protection functions previously spread across the federal agencies. While consolidating the consumer protection regulation into one agency is likely be more efficient in the long run, credit unions and other financial institutions will have to adapt to the reorganization of rules (for instance numbering, or updates to rules). The CFPB has also engaged in other rulemakings from DFA that apply to credit unions, for instance on remittance transfer disclosures and RESPA and TILA forms.

There are other provisions impacting credit unions that NASCUS noted to the GAO (although still in proposed form) such as disclosure of incentive-based executive compensation ($1 billion and above) and the removal of credit rating references to determine credit worthiness in NCUA's Rules and Regulations. NASCUS also discussed the interchange debit card rules. While exempting institutions under $10 billion in assets, they may have unintended consequences to smaller issuers in terms of competition and product offerings. In addition, the impact of mortgage regulations stemming from Dodd-Frank on credit unions is unknown, for example the still pending regulations on ability to repay and what defines a qualified residential mortgage.

NASCUS' general message to the GAO was that while it's too early to know the negative or positive impacts DFA will have on credit unions, it is clear that any significant changes in regulation require time and money in terms of training and implementation at the operational level at the credit union. It also takes time and training for examiners to get up to speed on new regulations.

NASCUS thanks the members who contributed their perspectives on this issue to incorporate into our response. NASCUS will inform members  when the GAO study is available for download.