Regulatory overreach is impeding credit unions’ ability to improve the financial wellbeing of members and Congress and regulators must take action to reverse this trend, America’s Credit Unions Transition Board Secretary Karen Harbin told members of a House Financial Services subcommittee Thursday. Harbin, president/CEO of Commonwealth Credit Union in Frankfort, Ky., testified on behalf of America’s Credit Unions for a hearing on the impact of politicized financial regulations.
“The regulatory burden on credit unions—whether from the CFPB, Federal Reserve, or even the NCUA—continues to increase. Credit unions, including mine, do not boast the massive earnings of big banks, but our impact lies in our genuine commitment to serving communities,” she said. “We are not here to merely facilitate financial transactions; our goal is to empower, educate and uplift our members, ensuring their financial wellbeing.
Harbin’s testimony also covered:
- The CFPB’s broad definition of “junk fees” that bears “no resemblance to the type of surprise hotel, ticket, and airline fees referenced by others as ‘junk fees’ and, in contrast, are all subject to comprehensive federal or state laws and regulations that include clear and conspicuous consumer disclosures.”
- Concerns with the CFPB’s overdraft proposal, which could “inadvertently undermine the ability of smaller financial institutions like ours to offer services that are critical to our members’ financial well-being.”
- Uncertainty surrounding how the CFPB is interpreting the abusiveness prong of its unfair or deceptive acts or practices (UDAAP) authority, noting “a rulemaking to further define abusiveness through the notice and comment rulemaking process” would help show whether or not an act is abusive and allow entities to better understand their obligations.
- The Federal Reserve’s debit interchange proposal, which she noted is “seriously flawed and based on a selective reading of narrow and incomplete data.” Harbin argued the Fed “must halt this rulemaking so that a baseline of timely, accurate, and comprehensive data about the effect of existing regulations can be developed and analyzed.” She added that credit unions support the Secure Payments Act, which would delay implementation of the Fed’s proposal until its impact can be studied.
In response to a question from Rep. Barry Loudermilk, R-Ga., on overdraft services, Harbin said that Commonwealth Credit Union monitors every overdraft transaction, tracks excessive use, and has multiple internal controls to ensure members remain aware of the nature of the overdraft program at all times , including letters when they sign up, overdraft for the first time, and use it excessively.
“We feel it is our responsibility to educate our members and not dictate how they manage their finances and that’s very important because members want the service, they request the service, and they will go elsewhere to get the service if we don’t provide it,” she said. “We can see that in their transaction history: if we take a member out of the overdraft program, we can see that they go to a payday lender.”
The full exchange on overdraft can be found below:
America’s Credit Unions Transition Board Secretary and @CommonwealthCU President/CEO Karen Harbin explains how overdraft programs are used during the @Financialcmte @FSCDems hearing. Watch her interaction with @RepLoudermilk to hear why members want and need this service: pic.twitter.com/gaXPB2yRK6
— America's Credit Unions (@AmericasCUs) March 7, 2024
America’s Credit Unions will continue to engage lawmakers on these issues and provide relevant updates to credit unions.
