Burdens Impacting Credit Availability, CUNA Tells House Subcommittee

WASHINGTON – CUNA urged a House subcommittee Tuesday to consider the impact of regulatory burden when examining the availability of credit for consumers and small businesses. CUNA wrote to leadership of the House Financial Services subcommittee on financial institutions and consumer credit for the record of its hearing on the state of lending in America.

“The system created by the Dodd-Frank Act essentially rewards the largest banks and less regulated nonbank lenders–the very institutions that caused the financial crisis–with one-size-fits-all rules that give them a competitive advantage over credit unions and small banks and push more consumers into their products,” the letter reads. “It is important for the subcommittee to examine the full scope of how lenders, particularly small lenders, are responding to the new requirements.”

In the letter, CUNA highlighted how certain loan types have failed to recover to pre-financial crisis levels since the enactment of Dodd-Frank. For example, CUNA noted a 16% decline in the annual average of one-to-four family home purchase originations from the 15 years prior to 2011.

“One of the reasons that loan growth has not recovered to pre-crisis levels is that federal regulators have imposed more than 200 regulatory changes on credit unions and other lenders,” the letter said. “The largest financial institutions, which comprise the greatest share of bank lending, are the least impacted by this increased regulatory burden because they can, for the most part, spread the cost of compliance over large economies of scale. Nevertheless, the impact of these rules is being felt by credit unions and small banks that do not have the scale over which to spread the burden.”

CUNA shared the findings of its survey of credit union executives from earlier this year, findings that include:

  • More than four in 10 credit unions (44%) that have offered mortgages sometime during the past five years have either eliminated certain mortgage products and services (33%) or stopped offering them (11%), primarily due to burden from Consumer Financial Protection Bureau (CFPB);
  • The Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Disclosure rules were mentioned by 80% of respondents as the single rule most negatively impacting credit unions that have offered mortgages. This is followed by the Qualified Mortgage rules (43%) and, at more of a distance, Mortgage Servicing (30%) and Home Mortgage Disclosure Act (HMDA) rules (19%); and
  • One in five credit unions (23%) that currently offer home equity lines of credit (HELOCs) indicate they plan to either curtail their HELOC offerings or stop offering them in response to the new HMDA rules.

CUNA also urged the subcommittee to “carefully examine the larger picture of the playing field CFPB rules have created for small financial institutions compared to the largest banks and nonbank lenders, and the unintended consequences that may be harming America's consumers.”

in Industry News