The Honorable Jeb Hensarling

September 29, 2015

Chairman

Committee on Financial Services

U.S. House of Representatives

Washington, D.C. 20515

The Honorable Maxine Waters

Ranking Member

Committee on Financial Services

U.S. House of Representatives

Washington, D.C. 20515

Dear Chairman Hensarling and Ranking Member Waters:

On behalf of the Credit Union National Association (CUNA), thank you for holding this week’s markup on pending consumer protection and regulatory relief legislation. CUNA represents America’s credit unions and their more than 100 million members.

We appreciate the efforts of the Committee to remove barriers so that credit unions can more fully serve their members. When credit unions’ boards and managers – not government bureaucrats – are making decisions about how to provide services, the member-owners of the credit union benefit. The legislation under consideration at tomorrow’s mark-up take steps in the right direction toward removing barriers that have a detrimental impact on credit unions’ ability to serve their members.

This letter presents our support on several of the bills under consideration by the Committee including H.R. 2769, H.R. 1266, H.R. 1090, and H.R. 957.

H.R. 2769, the Risk-Based Capital Study Act of 2015

We strongly support the Risk-Based Capital Study Act, introduced by Representatives Fincher (R-TN), Heck (D-WA), and Posey (R-FL) that responds to the very significant concern many credit unions have regarding the National Credit Union Administration’s (NCUA) revised proposal to update risk-based capital standards for credit unions.

Of particular concern is NCUA’s proposal to set a risk-based capital standard for the purpose of determining whether a credit union is well-capitalized. As we discussed with the Committee previously, and as former Senate Banking Committee Chairman Alfonse D’Amato stated eloquently in his comment letter, the Federal Credit Union Act permits the NCUA to impose a risk-based standard for the purpose of determining capital adequacy only. He wrote:

“[W]hen we included in the law the language: ‘The Board shall design the risk-based net worth requirement to take account for any material risk against [which] the net worth ratio required for an insured credit union to be adequately capitalized may not provide adequate protection,’ we meant just that, adequately capitalized. If we had intended there should also be a separate risk-based requirement to be well capitalized (in addition to the 7% net worth ratio), we would have said so.”

Credit unions also have significant concerns with the additional regulatory burden this proposal would cause, and they question whether the cost of the proposal is justified. Our analysis of the proposed rule shows that it would have done very little to reduce any negative impact to the National Credit Union Share Insurance Fund (NCUSIF) had it been in effect during the most recent financial crisis. The current Prompt Corrective Action (PC) system served very well during that crisis, with relatively few credit union failures and minimal losses to the NCUSIF when compared to the FDIC. If a goal of a Prompt Corrective Action scheme is for covered institutions to hold sufficient capital to withstand a severe financial crisis without imperiling the deposit insurance fund, the results of the test that was the recent financial crisis are compelling evidence that a major overhaul of current credit union capital requirements toward a Basel-style system is simply not required.

HR 1266, Financial Product Safety Commission Act of 2015

We support H.R. 1266, introduced earlier this year by Chairman Neugebauer, which would replace the Consumer Financial Protection Bureau (CFPB) Director with a Commission nominated by the president and confirmed by the Senate.

A commission would serve as a source of balance and stability for consumers and the financial services industry by encouraging internal debate and deliberation, ultimately leading to increased transparency. Moreover, a commission will further promote the CFPB’s ability to make bipartisan and reasoned judgments; will offer consumers the protection they deserve and the industry the certainty it needs, which in turn will help strengthen the economy; and will avoid the risk of politically motivated decisions. These changes would help eliminate partisan decision-making that harms consumers.

H.R. 1090, the Retail Investor Protection Act

We encourage the Committee to pass H.R. 1090, introduced by Representative Ann Wagner (R-MO), which would delay the U.S. Department of Labor’s (DOL) proposed fiduciary rule until the Securities and Exchange Commission (SEC) issues a rule governing standards of conduct for brokers and dealers. This legislation could provide more clarity and reduce regulatory overlap.

DOL’s proposed regulation defining a “fiduciary” of an employee benefit plan adds brokers and advisers providing advice to Individual Retirement Accounts (IRA) to the definition. This overly broad definition of a “fiduciary” could negatively affect credit unions who offer investment services through arrangements with third party brokers.

While many financial institutions have expressed concerns about this proposed rule, CUNA is particularly concerned about the impact it will have on credit unions because they often serve a different demographic than some of the conglomerate investment firms. When providing investment services to their members, credit unions aim to help American families of all means receive information about saving for retirement and planning for their future. While many large investment firms seek high net-worth clients, credit unions seek to provide services to their members in all financial situations to make it easier for these individuals to map out their financial future.

The DOL’s proposed rule creates regulatory overlap in its current form, which was even voiced by other regulators at both the Financial Industry Regulatory Authority (FINRA) and the SEC in comment letters to the DOL. Additional agency oversight in this area is unnecessarily duplicative and could be burdensome to credit unions who are already regulated by several other agencies, and face many regulatory burdens. CUNA believes H.R. 1090, the Retail Investor Protection Act, would be a step in the right direction by delaying a rule that could limit retirement planning services at credit unions by assuring better collaboration with the SEC.

H.R. 957, the Bureau of Consumer Financial Protection-Inspector General Reform Act of 2015

CUNA is supportive of H.R. 957, the CFPB-IG Act, introduced by Representative Steve Stivers (R-OH). This bill would create an independent inspector general for the Bureau. Currently, the Inspector General (IG) of the Federal Reserve Board also serves as the IG for the Bureau. Given the size of the Bureau and the scope of its mission, we believe it is appropriate for the Bureau to have its own IG and we support this legislation.

More than five years after the enactment of the Dodd-Frank Act and the creation of the Bureau, it is appropriate for Congress to give serious consideration to legislation designed to improve its accountability and transparency. On behalf of America’s credit unions and more than 100 million credit union members, we strongly urge the Committee to support and pass: H.R. 2769, H.R. 1266, H.R. 1090, and H.R. 957. Thank you for your consideration of our views.

Sincerely,

Jim Nussle

President & CEO