The regulatory burden stemming from the confusing, complex and voluminous rules and regulations mandated by the Dodd-Frank Act are having a harmful effect on credit unions' ability to serve their customers, according to industry experts testifying at today's House Financial Services Committee Financial Institutions Subcommittee hearing.
"Recently, federal financial regulators have expressed concern about the difficulty in quantifying the regulatory burden for financial institutions. I understand that it is often difficult to pinpoint specific rules and regulations that are especially burdensome for credit unions; rather it is the cumulative effect of new regulations being layered on top of old regulations. The purpose of today's hearing is to take a closer look at some of these issues to determine ways to allow credit unions to operate in a modernized regulatory system that provides them with the flexibility they need to serve the unique needs of their members," said Financial Institutions Subcommittee Chairwoman Shelley Moore Capito (R-WV).
Witnesses from the credit union industry testified on the time, resources, and efforts that credit unions must dedicate to deciphering and complying with the rules and regulations in Dodd-Frank.
Robert Burrow, President and CEO of Bayer Heritage Federal Credit Union in Proctor, West Virginia, said " the ever-growing regulatory burden on credit unions stems not just from one single onerous regulation, but a compilation and compounding of numerous regulations -- one on top of another -- stemming from a number of federal regulators. A number of these regulations may be worthwhile and well-intentioned, but they are often issued with little coordination between regulators and without elimination or removal of outdated or unnecessary regulations that remain on the books."
Other witnesses also testified to the problems they face due to Dodd-Frank's one-size-fits-all approach, which largely imposes the same regulatory burdens on small institutions as larger ones. Because smaller institutions do not have the same economies of scale as larger institutions, these costs disproportionately impact their ability to offer competitive pricing for their services.
"The burden of complying with ever-changing regulatory requirements is particularly onerous for smaller institutions like mine, because most of the costs of compliance do not vary by size, and therefore proportionately are a much greater burden for smaller as opposed to larger institutions," said Pamela Stevens, President and CEO of Security One Federal Credit Union headquartered in Arlington, Texas. "If a smaller credit union offers a service, it has to be concerned about complying with most of the same rules as a larger institution, but can only spread those costs over a much smaller volume of business. Not surprisingly, smaller credit unions consistently say that their number one concern is regulatory burden."
Wednesday's hearing was the second in a series of hearings the committee is having to focus on Dodd-Frank's regulatory burden and the resulting harmful economic consequences.