CFPB proposal would create ‘uneven playing field’ for credit unions
A recent CFPB proposal to adopt a standard definition to designate nonbanks for CFPB supervision would create an uneven playing field for credit unions. In comments filed with the bureau Thursday, America’s Credit Unions Regulatory Affairs Counsel Tyler Maron expressed appreciation to the bureau for working to limit regulatory burdens, while also raising these concerns about the impact to credit unions.
“As it stands, credit unions are extensively supervised by two regulatory agencies while non-depository institutions like fintech companies are not. Consequently, credit unions would be subject to far more compliance costs and a massive competitive disadvantage,” the letter reads.
Instead of finalizing the rule as proposed, America’s Credit Unions comments urge the CFPB to:
- Retain the original Dodd-Frank statute’s focus on conduct that “poses risks to consumers,” which under the proposal would be changed to a requirement of “high likelihood of significant harm,” as narrowing the statute could serve as a de facto exemption for nonsupervised entities;
- Publish a transparent factor-based rubric with objective indicators that establish “risks to consumers,” from nonbank entities, including abnormal complaint rates, repeat actions by state attorneys general or the FTC, material control of consumer funds or data, or outsized charge-off or refund ratios; and
- Coordinate closely with prudential and state regulators to ensure supervisory parity across functionally equivalent products and providers.
The CFPB Thursday also released its final rule making confidential supervisory designation decisions and orders. This rescinds a 2022 rule and restores a 2013 rule following the CFPB’s concerns that a publicly published list of designated entities could intensify reputational harm to nonbanks due to public speculation.
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