By Ray Birch
MADISON, Wis.—Does the CFPB understand credit unions? One CU executive who is a member of the agency’s CU Advisory Council said he is hopeful the council is being effective in helping the Bureau gain a greater appreciation for—and knowledge of—cooperatives.
Chad LaFlash, AVP of research and product strategy with the $5-billion UW Credit Union, who this year began his first two-year term on the Advisory Council, spoke with CUToday.info about where he believes the CFPB is focused, offered a warning over making missteps with fees, and shared insights into how he hopes his team is working to influence the Bureau in ways that favor the movement.
“Keep in mind that a lot of people think the CFPB doesn't really understand credit unions very well, when they come up with their blanket policies,” LaFlash said. “I’m particularly interested in seeing from the inside what kind of influence we can insert into their upcoming policies.”
Gaining a Better Picture
LaFlash, being new to his role on the council, said he is still working to get a firmer grasp in understanding where the CFPB is really zeroing in.
“I do think that when they are talking about junk fees they're not really talking about overdraft fees,” he said. “They've talked about other things related to late payments or loan payments. I think, rightfully so, they are also concerned about overdraft policies and overdraft fees, as we all know.”
LaFlash said he has gained a good understanding of what needs to be around overdraft pricing based on what UW Credit Union is experiencing, and plans to share that with the rest of the Advisory Council.
‘Fair and Reasonable’
“We, as credit unions, need to make sure that the fees we put in place are fair and reasonable to the consumers, and reasonable to the transactions involved,” he said. “So, only when they are needed and they must be fair. I think credit unions are moving towards that more and more.
Chad LaFlash
“If a bank or credit union is still charging $30, and the transaction involved is not even $30, you know there's a good case to be made that we need to reconsider those policies,” continued LaFlash. “And then, with overdrafts, there are other things that have been called out over the years that are bad practices, like ordering of transactions.”
The ordering of transactions has been at the core of the litigation filed against credit unions and other financial institutions when it comes to overdrafts, as CUToday.info has widely reported.
Leading the Way
LaFlash said 332,000-member UWCU has been leading the way locally with overdraft changes.
“We've reduced our overdraft fees considerably,” he said. “You should not count on overdraft income as a significant source of revenue. Instead, look at it as a way to help consumers who are not being as careful as they should. Defray the costs associated with that and price to incent the right behaviors, but not at the expense of consumers who are struggling. We never charge anyone more than $5 on overdrafts.”
LaFlash hopes the Advisory Council will share its insights to help the CFPB make some “meaningful progress in protecting consumers against the most harmful and egregious actions, but not at the expense of credit unions who are acting appropriately. I hope that we can make some meaningful progress in the year ahead.”
‘Always Been Interested’
LaFlash said he got involved with the Advisory Council after reading about it and becoming intrigued. (As CUToday.info reported here, the CFPB is currently seeking applicants for the CU Advisory Council).
“I've always been interested in the CFPB, in their work, their purpose and mission,” he explained. “From day one I found it compelling and interesting and, frankly, at first I didn't realize being part of the Advisory Council was something that could even be applied for.”
But he then learned he could apply.
“I thought it would be kind of fun to support their work and get involved and help guide their mission,” LaFlash said. “Give them some guidance and real-life examples. With my own background being pretty extensive in the industry and in various roles, I thought I was a good candidate.”
The application was a bit arduous, according to LaFlash.
“It was a more grueling process than I anticipated. There's a full FBI background check, extensive interviews and a long list of references. Halfway through the application process I thought, ‘What am I getting into?’” he recalled.
Experience May Have Played Role
LaFlash believes his background in product development and research eventually helped him land the role.
“At UWCU we are putting together products the CFPB is interested in,” he said. “One of the things the CFPB has been talking about is relationship pricing models for accounts and services. That's something I put together for our credit union over 20 years ago when we were one of the leaders in the industry. I've also been very involved in setting our policies to be consumer friendly—and we are at the leading edge in terms of inclusivity and accessibility for consumers in our market.”
There are three other advisory groups within the CFPB: Community Bank Advisory Council, Consumer Advisory Board and the Academic Research Council.
“There are eight members of the credit union council, and the terms are for two years,” said LaFlash. “They stagger them four and four. Everybody on the council is from credit unions.”
What’s Being Signaled
LaFlash repeated that to date his experience with the CU Advisory Council makes clear the CFPB will be paying close attention to relationship pricing schemes and understanding how that works and whether or not those programs are effective or in any way harmful to consumers.
He recalled that during his first meeting with the Advisory Council there was discussion around what changes could be occurring within credit unions and banks following the recent bank failures.
“Are there better ways that the CFPB can give guidance about how they should be structured?” he asked. “The CFPB recently came up with a number of initiatives that they're working on, including examination of what they refer to as junk fees—fees that are painful to consumers, especially those at lower income levels.”