Advocacy Outlook Presented to RKL s 2016 Credit Union Seminar October 2016
Our Advocacy Goal To create a more favorable operating environment for credit unions to serve their members through the removal of regulatory barriers and expansion of credit union powers and opportunities.
Trends Impacting Credit Unions Credit Union Trends Very strong membership growth High and increasing loan growth Vastly improved asset quality High earnings Continuing consolidation Public Policy Trends Post-Crisis Regulatory Shock Continues Historic Level of Congressional Gridlock An Election Unlikely to Change Dynamics Changing Credit Union System Requires Change in Advocacy Approach 3
What does this mean for credit union advocacy? A healthy credit union system keeps Congress from exercising too much scrutiny over the system, the share insurance fund, and the regulator. A growing credit union system enhances our value to consumers and small businesses, increasing our relevance in the eyes of policymakers. A consolidating credit union system means that we have more large credit unions and fewer small credit unions, requiring us to manage the potentially impact on our grassroots capability.
Our Advocacy Agenda Reduce regulatory burden facing credit unions Expand consumer and small business access to credit unions Engage in public policy developments on payments and data security Preserve favorable tax treatment of credit unions
Fierce CUNA/League 360 advocacy
Remove Barriers so you can better serve your members National Credit Union Administration Since 2007 200+ Regulatory Changes Federal Reserve Federal Communications Commission Congress and State Legislatures Consumer Financial Protection Bureau Department of Labor
Sample of Regulatory Changes Since 2014 Risk Based Capital Home Mortgage Disclosure Act Qualified Mortgage Rule Incentive Based Compensation Field of Membership Truth-in-Lending Act / Real Estate Settlement Procedures Act Integrated Disclosures Customer Due Diligence Small Entity Definition Military Lending Act Same Day ACH Associational Common Bond FOM Requirements Fixed Assets Check Collection and Returns Cyber Security Framework FHLB Membership Student Loan Servicing Asset Securitization and Safe Harbor Remittances Flood Insurance IOLTA Arbitration Rural and Underserved Definitions Occupancy Rule Member Business Lending Telephone Consumer Protection Act Corporate Credit Unions Pre Paid Accounts
Impact of Regulatory Burden on Credit Unions in 2014 9
Building on 2015 Accomplishments Field of Membership and MBL Relief Privacy Notification Modernization Privately insured credit unions eligible to join FHLBs Tax Status Preserved 20+ Bills approved by HFSC Kept State Treasurers off harmful Chip & PIN Mandate Letter Advocated in court on Data breach, Interchange, and TCPA Risk-Based Capital Improvements Enacted new definition of rural area for CFPB mortgage rules
We Are Making Progress in 2016 Calendar-Year Exam Requirement Eliminated Overhead Transfer Rate Methodology Published Tax Status Preserved 399 House and Senate Members Wrote CFPB on Exemption Authority State Credit Union Act Improvements in: Alabama, Colorado, Florida, Georgia, Indiana, Virginia and Wisconsin Interchange Victory in Texas Court FHLB Membership Rule Improved Final Fiduciary Rule Included CUNA- sought changes TRID Reopened Reg Z Small Creditor Exemption
Do-Nothing Congress Does Not Mean Nothing Will Be Done in Washington 35000 9.00% 30000 7.49% 8.00% 25000 20000 4.20% 6.32% 4.31% 4.67% 7.00% 6.00% 5.00% 15000 10000 5000 2.20% 3.49% 3.28% 2.80% 1.95% 4.00% 3.00% 2.00% 1.00% 0 80th Congress (1947-1948) 83th Congress (1953-1954) 86th Congress (1959-1960) 89th Congress (1965-1966) 92nd Congress (1971-1972) 95th Congress (1977-1978) 98th Congress (1983-1984) 101st Congress (1989-1990) 104th Congress (1995-1996) 107th Congress (2001-2002) 110th Congress (2007-2008) 0.00% Congressional Gridlock: Legislation Enacted As a Percentage of Legislation Introduced 80th - 112th Congresses
Final Year Regulatory Push There is an average of 25% more regulatory activity in the 8 th year of a presidency than the average of the first seven years.
Current Advocacy Issues Credit Union Powers Field of Membership Member Business Lending Supplemental Capital / Risk-Based Capital Public Deposits Prize Linked Savings Federal Credit Union Act Update State Credit Union Act Updates Examination and Supervision Examination Frequency and Fairness Supervisory Modernization Transportation Network Company Issues Patent Reform IOLTA / Prepaid Card Insurance Coverage Operation Chokepoint Consumer Protection Overdraft Protection Payday Lending Telephone Consumer Protection Privacy Notification DOL Fiduciary Definition CFPB Structural Reform TILA/RESPA HMDA Qualified Mortgage Rule Debt Collection Student Lending Military Lending DOL Overtime Proposal Tax and Budget Policy Federal Tax Exemption State Tax Exemptions Local Tax Issues UBIT FATCA IRS Disclosures NCUA Budget Transparency Congressional Budget Appropriations Housing Federal Home Loan Bank Parity GSE Reform Flood Insurance Payments Interchange / Surcharging Amicus Briefs Data / Cyber Security Faster Payments / Same Day ACH 14
Our Advocacy Strategy Our goal is to influence public policy to create the best possible operating environment for credit unions. Regulators are ultimately responsible to Congress. During gridlock, our ask is for Congress to influence CFPB, NCUA and others. 15
Using Congress to Reduce Regulatory Burden CFPB Exemption Authority Stivers-Schiff Letter Donnelly-Sasse Letter Appropriations Report Language Shelby and Hensarling Regulatory Relief Bills CFPB Structural Reform CFPB Mortgage Rule Makings NCUA Budget Act FHLB Access Operation Chokepoint 16
CFPB Exemption Authority Section 1022(a)(3)(A) The Bureau, by rule, may conditionally or unconditionally exempt any class of covered persons, service providers, or consumer financial products or services, from any provision of this title, or from any rule issued under this title, as the Bureau determines necessary or appropriate to carry out the purposes and objectives of this title, taking into consideration the factors in subparagraph (B).
Pending and Anticipated Regulatory Changes NCUA Field of Membership (Near Final) Call Report Modernization / Examination Efficiency (In Progress) CFPB Arbitration (Proposed) Small Dollar, Short Term (Payday) Loans (Proposed) Third Party Debt Collection (Proposed) TRID Amendments (Proposed) First Party Debt Collection (Anticipated) Overdraft Protection (Anticipated)
What are the prospects next year?
Future Opportunities ØPush Congress Further on Data Security Concerns ØAggressively address CFPB Regulatory Burden ØPotential moratorium on new regulations and CFPB Structural Reforms ØStructural changes to the CFPB ØTargeted statutory relief ØPursue a Federal Credit Union Act update ØBuild off work of the Charter Enhancement group and feedback and input from all stakeholders ØLay the ground work Build System Support Set Expectations Create Favorable Political Environment ØView this as a three year plan.
Four Plausible Election Scenarios Scenario #1 Status Quo Clinton wins White House GOP Retain Senate GOP Retain House Scenario #2 Conventional Wisdom Clinton wins White House Dems Retake Senate GOP Retain House Scenario #3 Democratic Trifecta Clinton wins White House Dems retake Senate Dems retake House Scenario #4 Make America Great Again Trump wins White House GOP Retain Senate GOP Retain House 21
Scenario # 1 Status Quo Why It Will Happen Electorate uncomfortable with Trump gives Clinton the keys to the White House, but tasks GOP with providing checks and balances. What Means for Credit Unions Gridlock ensues and may worsen. Continued opportunity for pressure from Congress on CFPB. Door opens slightly for reforms because of 2018 Senate elections. Tax reform is possible. 22
Scenario #2 Conventional Wisdom Why It Will Happen Electorate acts rationally to the choices on the ballot. Clinton solidifies support in swing states. Dem candidates make few mistakes. Lower than normal GOP turnout hurts incumbent GOP Senators. What it Means for Credit Unions Door may open a bit to discuss charter enhancements. Increased attention to community financial institution issues in Senate Banking Committee. Slight possibility to begin moving some CFPB reforms. Continued pressure from Congress on the CFPB exemption authority. Tax reform remains possible but slightly more complicated 23
Scenario #2 Conventional Wisdom Slight possibility to begin moving some CFPB Reforms? Democrats will defend 25 seats in 2018, including four in deep red states. Democrats will have more influence over potential changes. Clinton administration may feel less ownership to the structure of the CFPB. Democratic Senators on Banking Committee Up for Reelection in 2018 Brown Donnelly Heitkamp Tester Warren 24
Scenario #3 Democratic Trifecta Why It Will Happen An electorate scared to death of Donald Trump makes down-ballot GOP candidates pay for nominating him. Deeply suppressed GOP voter turnout hurts otherwise safe GOP candidates in suburban districts. Open seats go the Democrats way. What It Means for Credit Unions Charter enhancement conversation accelerates. Dodd-Frank technical changes possible, but structural reform can almost certainly be ruled out. Steady regulatory stream from CFPB. Tax reform becomes slightly easier / more probable. Potential for House GOP leadership shake-up. 25
Scenario #4 Make America Great Again Why It Will Happen Electorate is fed up with establishment, does not want four more years of Obama or Clinton. Trump unites the GOP and voters reward him with majorities in both chambers. What It Means for Credit Unions Possibility of Dodd-Frank reforms increases. CFPB moratorium enters realm of the possible. Hard to see there being oxygen in the room for charter enhancements. Slower regulatory stream after Cordray s term expires in 2018. But who really knows what a Trump administration would be like? 26
Looking ahead to 2018 Senate Dems must defend 25 seats, including several in red states. Cordray s term expires in 2018; nomination could be campaign issue and could spur reform. Supreme Court Vacancies could loom large in 2018. House Term limits mean a new House Financial Services Committee Chairman will be installed after elections. Party of the president tends to lose seats in first term mid-term elections. 27
The Bottom Line 2016 is an election year like none other, but credit unions are set up to win no matter what the outcome of the election is. The 2018 elections could have greater consequences on credit unions than the 2016 elections.
What do we need to do in order to be well-positioned in 2017 and beyond?
Two Keys to Improving Operating Environment for Credit Unions Credit Union Performance Must Remain Strong: Membership growth Loan growth Asset quality Earnings Service Excellence Credit Union System Must Continue to Project a Strong, Unified Voice: Who will speak for credit unions? 30
Bringing it Home Sign-up for MAP Subscribe to the Advocacy Update Follow the Removing Barriers Blog Respond to Comment Calls Participate in your League s Hikethe-Hill Program Invite elected officials to your credit union Attend GAC Be good citizens 31
CUNA s Member Activation Program Overall Reach 300 credit unions enrolled 47 states represented Potential reach of more than 13.5 million members Ease the Burden 20+ CUs contacted 600,000 members 20,000 messages sent to Capitol Hill CUNA.org/MAP Imagine a reach of more than 100 million members 85% of those who visited campaign website took action 32
Bringing it Home Sign-up for MAP Subscribe to the Advocacy Update Follow the Removing Barriers Blog Respond to Comment Calls Participate in your League s Hikethe-Hill Program Invite elected officials to your credit union Attend GAC Be good citizens 33
Thank you! For more information regarding these and other legislative issues, please visit the CUNA website (www.cuna.org) and click on Legislative and Regulatory Advocacy. If you would like to follow-up with any questions or comments, please send them directly to Ryan Donovan via email at rdonovan@cuna.coop.