WASHINGTON—NAFCU has sent a pair of letters to Capitol Hill, the first regarding actions taken by the SBA, the second urging greater accountability by the CFPB.
In its letter to the Senate Small Business Committee, sent ahead of its oversight hearing on the SBA, the trade group expressed concerns about the administration’s final rules to expand its lending networks.
“As champions of financial inclusion, credit unions have been at the forefront of efforts to increase access to personal and small business financial services for underserved communities,” wrote Vice President of Legislative Affairs Brad Thaler. “At the same time, NAFCU has worked tirelessly to ensure that non-depository financial institutions such as fintechs operate on a level playing field with credit unions to protect consumers and small businesses by instituting appropriate financial safeguards and compliance processes.
“Unfortunately, we are concerned that two recent actions by the SBA may end up running counter to both of these efforts by opening the programs to more underregulated competition,” he added.
Two Final Rules
The SBA in April issued two final rules: the first to change regulations governing its 7(a) and 504 loan programs related to lending criteria, loan conditions, affiliation standards, and more, and the second to amend its loan program regulations to lift the moratorium on licensing new small business lending companies (SBLCs) and add a new type of entity, called a “Community Advantage SBLC.”
“While these are two separate rules, they would have the combined effect of loosening 7(a) lending standards at the same time as opening that program to entities already proven to be more susceptible to fraud than traditional depository institutions overseen by federal prudential regulators,” wrote Thaler.
Letter on CFPB
In addition, NAFCU also sent a letter to the House Financial Services Committee calling for greater accountability from the CFPB.
The committee this week is holding markups of several bills, including one to increase accountability at the CFPB by reforming the single director structure to a bipartisan commission, subjecting the Bureau to the appropriations process, and more.
“During consideration of financial reform, NAFCU was concerned about the possibility of overregulation of good actors such as credit unions,” wrote NAFCU Senior Vice President of Government Affairs Greg Mesack. “Unfortunately, our concerns were proven true. While it is clear the CFPB has done some good, its primary focus should be on regulating the unregulated and the bad actors, not adding new burdens on credit unions that already fall under a prudential regulator.”
Support for Proposals
In the letter, Mesack stated NAFCU’s support for CFPB accountability efforts included in the CFPB Transparency and Accountability Reform Act:
- Establishing a five-person leadership commission, which “has distinct consumer benefits over a single director”
- Subjecting the CFPB to the congressional appropriations process to “give Congress much needed oversight and incentive the bureau to focus on true consumer abuse and work to uphold congressional intent”
- Creating an office of Inspector General at the CFPB to increase transparency, oversight, and accountability at the Bureau
- Establishing the Office of Economic Analysis within the CFPB to better determine how the Bureau’s actions “has or will impact competition, choice, and access to financial products”
- Requiring cost-benefit analysis of rulemakings to protect against one-size-fits-all regulations
- Requiring the Bureau to convene Small Business Regulatory Enforcement Fairness Act (SBREFA) panels to determine how rules will impact small entities and appropriately tailor regulations as necessary
CUs’ Unique Nature
Mesack also called on the committee to question the Bureau’s “underutilization of its statutory exemption authority to recognize the unique nature of and constraints faced by the credit union industry.”