WASHINGTON—A report published by the U.S. Government Accountability Office (GAO) has found weaknesses in the way financial regulators assess the impact proposed rules could have on small institutions and the economy.
The GAO's study found that regulators' analyses "could undermine the goal of [Regulatory Flexibility Act (RFA)] and limit transparency and public accountability," reported NAFCU in its analysis.
Under the RFA, federal agencies are supposed to assess the impact a proposed rule might have on small entities and consider alternatives to minimize any significant economic impact of the rule. Agencies can alternatively certify that a rule wouldn't have significant economic impact on a substantial number of small entities.
The study looked at six financial regulators: the CFPB, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission.
The GAO noted in its report that while the CFPB's regulatory flexibility analyses included required components, some of the rules' analyses didn't estimate compliance costs for small entities. Of those that did include cost estimates, "several did not quantify all identified costs or explain why such estimates were not available," noted NAFCU.
In its overall findings, NAFCU noted that the GAO highlighted these concerns:
- In certifications for rules that were determined could affect small entities, analyses were conducted to support regulators' conclusions. Analyses lacked key information that the Small Business Administration and Office of Management and Budget recommend, including data sources, methodology and definitions of criteria
- In initial and final regulatory flexibility analyses reviewed by the GAO, financial regulators' evaluation of key RFA components was limited. Most regulators also didn't disclose data sources or methodologies, and for most rules the regulators were unable to provide supporting documentation for their analyses
It also included recommendations to help the financial regulators improve their rule assessments and compliance with the RFA.
NAFCU said it will continue to advocate that the CFPB and other financial regulators reevaluate regulations and pursue opportunities to reduce credit unions' regulatory burden.