WASHINGTON—The House of Representatives is in recess this week, and both CUNA and NAFCU say they will be focused on Senate hearings as well as the comment deadline for the CFPB’s credit card late fee proposal—although most eyes in Washington this week will be across town on the Fed.
In particular, the CU trade groups are both monitoring a Senate Banking Committee hearing today to discuss reauthorization of the National Flood Insurance Program (NFIP).
The House Financial Services Subcommittee on Housing and Insurance reviewed reauthorization during a hearing last week, where committee members once again discussed the need to reform the program and called for a 10-year reauthorization period instead of the current one-year period. NAFCU said it has supported the long-term reauthorization and continued modernization of the NFIP.
On Thursday, the Senate Banking Committee will hold hearings related to holding executives accountable after recent bank failures, which both trade associations said they will be closely following.
Fallout From Bank Failures
“We are tracking, along with everyone else in the financial services industry, the fallout from First Republic Bank failing over the weekend,” said CUNA Deputy Chief Advocacy Officer for Federal Government Affairs Jason Stverak. “We've all seen the news that it has been taken over by JP Morgan Chase through the FDIC. But, `obviously, we will wait to see if there is any larger contagion impact throughout the whole market. We will watch to see if there is any impact on credit unions.”
Meanwhile, also on the agendas of both trade associations is the May 3 deadline to file comments on the CFPB proposal around card fees that is opposed by both trade associations.
“The proposed rule lowers the permissible safe harbor for a late fee from $40 down to $8 and removes the annual inflation adjustment,” said AlexanderMonterrubio, CUNA deputy chief advocacy officer for regulatory affairs. “This is a pretty significant change. We'll be filing our letter on Wednesday and we will outline several objections of the proposed rule. In particular, that it's been unnecessarily rushed and there was only a 30-day comment period on a rule that is really unjustified by the data.”
NAFCU, meanwhile, pointed to research it conducted that indicates the CFPB’s proposal will “stifle” any opportunity for at-risk consumers to reach financial freedom.
Programs Would Need to be Eliminated
The data, according to NAFCU, also show credit unions—as not-for-profits—can’t cover the costs of fee delinquencies with an $8 late fee, which the organization said will force CUs to eliminate rewards programs and/or financial literacy programs, while also leading to increased costs for all consumers.
The study also found credit unions reporting they plan to raise interest rates on cards should the lower threshold be put in place.
“Penalties are intended to deter unacceptable behavior. An $8 late fee is not a deterrent,
it’s an incentive to stop paying bills at the cost of a Subway Footlong,” NAFCU stated. “Contrary to the genesis of their own charter, the CFPB is recklessly pushing consumers into a cycle of debt, discouraging them from paying their bills, and encouraging them to ruin their credit history. All without providing easy access to financial literacy resources.”
Looking to the Fed
Despite all that, most of the attention this week will go to the Federal Open Market Committee (FOMC) two-day meeting this week, which begins today. Most analysts are predicting another rate increase before the committee adjourns.
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