Memo

TO: All Affiliated Roundtable Credit Unions
FROM: Bill Cheney, CUNA CEO/President
RE: Senate Sends REgulatory Reform Bill to President for Signature
Date: Thursday, July 15, 2010

Good afternoon,

Earlier today, the Senate passed the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. This bill is, of course, the comprehensive financial reform bill that Congress has been working on for over a year. The Senate action clears the way for the legislation to be signed by President Obama in the very near future.

As we all know, credit unions did not cause the crisis that provided the impetus for this legislation, but we have been collateral damage to the crisis and its legislative remedy. CUNA and the Leagues have been working for several months to minimize the extent to which this legislation adversely affects credit unions.

First among our concerns has been the interchange provision that was added to this bill by the Senate in May. This provision was not a part of the administration's original regulatory restructuring proposal. It was not subject to hearings or a comprehensive debate. Despite our extraordinary grassroots and lobbying efforts, we were not able to remove this provision from the legislation; but because of these efforts, we were able to secure significant improvements to this provision. These improvements, while certainly not a panacea, will give us a better chance at convincing the Federal Reserve to set an interchange rate that would accurately reflect the true costs to credit unions, than we would have had if you had not taken the action you did in June. We have already had several discussions with the Federal Reserve regarding our concerns with this proposal -- these are the first of many meetings with the Fed on this issue.

Given all of the focus on interchange, it is very easy to overlook the fact that there are several hundred other provisions in this legislation -- most of them aimed at ensuring that the events and activities that caused the financial crisis cannot happen again. Many of these provisions will have no direct impact on credit unions; however, some, including the proposal to create the Bureau of Consumer Financial Protection, will affect credit unions. Over the course of the last year, CUNA has been working to ensure that when this legislation becomes law, the adverse impact on credit unions is minimized. Our efforts in this regard have been relatively successful:

• Credit unions with less than $10 billion in total assets will not be subject to examination and enforcement by the CFPB, except on a sampling basis or when significant consumer complaints have been reported.
• There is no plain vanilla product requirement.
• The deposit account data collection provision has been removed.
• Credit unions will not pay for the new consumer bureau.
• The legislation, thanks in very large part to our efforts, includes provisions directing the CFPB to take into consideration the impact of its regulations on credit unions and to identify and address outdated, unnecessary, and unduly burdensome regulation in an effort to reduce regulatory burden.
• The preemptive authorities of the Federal Credit Union Act remain unchanged.
• The Financial Stability Oversight Council, the group of banking regulators that have the authority to review, stay and set aside CFPB regulations, includes credit union representation.
• The CFPB has no authority to regulate the Community Reinvestment Act.

The legislation also includes provisions related to share insurance (making permanent the $250,000 insurance coverage level), remittances, and access to mainstream financial institutions that will present opportunity and challenges to credit unions. We have been working on these issues during the legislative process and we will continue to work on these issues as this legislation moves to the regulatory process.

In the coming days, we will be sending more information regarding how we will approach the regulatory process, especially as it relates to the interchange provisions. We also intend to hold a series of audio conferences in August examining the provisions of this legislation that are of greatest concern to credit unions and how CUNA is addressing these issues. In the meantime, if you have any questions regarding this legislation or the regulatory process, please do not hesitate to contact John Magill (jmagill@cuna.com), Eric Richard (erichard@cuna.com), Bill Hampel (bhampel@cuna.com), Ryan Donovan (rdonovan@cuna.com), Mary Dunn (mdunn@cuna.com) or me.

Best Regards,

Bill Cheney