Credit Unions Hurt By Proposed Reform
Over the past two years the resolve of American families has been tested by unemployment, mortgage foreclosures, the loss of pensions, and spiraling 401(k) accounts. Yet the American spirit has persevered, neighbors are helping neighbors, communities have become closer knit, and we are all working together to dig our country out of this financial mess caused by banks that are “too big to fail.”
Congress should be applauded for addressing the root causes of the financial crisis. The abuses that took place on Wall Street are inexcusable, and safeguards need to be put into place to ensure that hard-working Americans are well protected in the future. While it is clear that glaring gaps in consumer protection, including the existence of unregulated predatory lenders must be addressed, I fear Congress is on the verge of overcorrecting to the detriment of the very people who need and deserve greater safeguards.
Penalizing The Little Guys
It is widely recognized by members of Congress on both sides of the aisle that credit unions were not the cause of the current economic problems and did not make the loans that helped lead to the downfall of the housing market. Yet legislation — the Restoring American Financial Stability Act of 2010 — moving to the Senate floor would create a new “Consumer Financial Protection Bureau” with broad authority to slap credit unions with additional undue regulatory burdens. The cost of compliance with new rules of a new regulator for a nonprofit credit union will far exceed those of a large financial firm that has thousands of employees and can turn to its shareholders or capital markets to raise funds.
Simply put, the consequences of a new Consumer Financial Protection Bureau could be disastrous for credit unions and their members. For the 92 million credit union members across the country it could mean lower dividends or higher interest rates on loans. It could mean credit unions laying off employees at a time when unemployment is teetering at 10 percent, or even worse, shutting their doors altogether.
Credit unions have long led the way on pro-consumer issues. They have a history of offering better financial products and exceptional customer services to their members. In addition, there are many consumer protections already built into the Federal Credit Union Act, including a prohibition on pre-payment penalties and the only federal usury ceiling on financial institutions.
Credit unions are not-for-profit member-owned institutions that did not participate in sub-prime mortgage lending or receive bailout money from the government. Perhaps most importantly, credit unions have not stopped lending to their members during the trying times we continue to experience.
Congress should be focusing on the bad actors on Wall Street and working to ensure that predatory lenders are never able to prey on consumers again. Instead, lawmakers in Washington are prescribing a one-size-fits-all solution that will harm credit unions and the communities they support. As this legislation moves ahead, I urge Senators Kerry and Brown not to make credit unions and the communities they serve in Massachusetts pay for the failures on Wall Street, and support the removal of credit unions from the purview of the new Consumer Financial Protection Bureau.
Michael Lussier is the president and CEO of Webster First Federal Credit Union of Worcester.
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