WASHINGTON–The Defense Credit Union Council has sent a letter to Congress outlining its position on a number of issues.
The letter was sent in advance of hearings on Oversight of Prudential Regulators, which NCUA Chairman Todd Harper was unable to attend due to back surgery.
Among the issues addressed in the letters:
Credit Card Late Fees
DCUC said it is “always concerned when unsuspecting consumers are subject to unfair and deceptive trade practices. In fact, defense credit unions have a rich history of providing safe financial programs to help make ends meet. This is why it is hard to support the CFPB new rule because of the adverse impacts to military families.”
The Defense Council argued that issuers will be forced to increase costs to offset delinquencies and charge offs, and cited CFPB data indicating the final late fee rule will “cause harm to 74% of consumers who pay their credit cards on time.”
“Higher principal and interest payments will increase the burden on all military consumers,” DCUC added.
The DCUC further said the CFPB’s new rule makes it much more difficult for military leaders to establish good order and financial discipline. “When credit card late fees are significantly reduced, there is less incentive to pay on time,” it stated.
“Finally, while we are against absurdly high late fees, we believe the market can and will regulate what people can and are willing to pay. The credit card market is already competitive,” DCUC said. “Especially when marketing access for consumers with lower credit scores or little to no credit history Those who can offer better terms and access to credit cards will prevail. Military families are very perceptive when it comes to additional costs.”
Changes to the Current Credit Card Interchange Fee System
The DCUC told Congress the “Credit Card Competition Act,” S. 1838, as proposed “does nothing to reduce additional costs for consumers and harms working-class Americans. All it really does is secure another round of windfall profits for big box retailers and e-commerce giants.”
The letter cited what it called the “clear disconnect” between the intentions of the 2010 Durbin Amendment and what actually occurred and said few merchants were found to have reduced prices or removed debit restrictions, even as debit costs decreased.
“Frankly, they were keeping the money for themselves,” DCUC said.
“Worse, these groups have attempted to exploit military members, while targeting Medal of Honor recipients, Purple Heart recipients, former POWs, and disabled veterans among others in their flawed study proposal,” DCUC said. “Not only would savings be kept by the merchant, but this legislation would also increase the cost of basic banking services for consumers – hitting lower-income families the hardest. Our service members and veterans deserve better…”
The letter also raised security concerns as a result of the legislation.
“While the bill contains a cynical carve-out for smaller institutions, we all know that regulating the largest institutions and payment networks forces changes to the whole credit card payments ecosystem,” the letter reads. “As a result, finding the resources to pay for technology updates and re-issuance of cards becomes much more difficult for smaller institutions all while driving increases in fees everywhere else. This is exactly what happened with debit cards in 2010.”
Fees and NSF
The Defense Credit Union Council said it has always advocated for laws and regulations that protect the financial readiness of our servicemembers stationed across the country, overseas, and in harm’s way.
“While we applaud efforts to eliminate Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) at all levels of government. There are several innovative financial products and services that are meant to protect our servicemembers from harm,” DCUC wrote. “NSF fees can continue to be an effective program and there are always creative ways to implement a healthy overdraft program. However, burdensome regulations can stifle such innovation and eliminate worthy programs.
“Eliminating such programs invites financial predators onto the scene. Defense credit unions work very hard to keep such predators off the installation and away from vulnerable servicemembers,” it added.
Veterans Member Business Lending
DCUC told the committees it supports exempting business loans made to veterans from current credit union business lending caps.
“Our member credit unions, along with virtually every credit union in the United States, proudly serve many veterans in their communities,” the letter stated.
Veterans Housing
DCUC told Congress it appreciates the Department of Veterans Affairs’ (VA) efforts to implement and expand the loss mitigation options available under the VA Home Loans Guaranty program to help veteran borrowers avoid foreclosure. But it also “believes it is evident that the VA Home Loan Program needs an upgrade.”
“Additional resources and better loss mitigation tools in the program will help ensure veterans and servicemembers are not faulted during a time of financial hardship,” DCUC said. “We also believe that the VA Home Loan Guaranty Program would benefit from aligning its VA Minimum Property Requirements (MPRs) with the property condition standards established by Fannie Mae and Freddie Mac (the GSEs), the most widely used financing programs in the market, and the most common alternatives used by veterans.
“Our members have advised us that the MPRs can make the VA program more difficult for prospective homebuyers without reducing risk to credit union lenders or their members,” the letter continues.
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