Viewpoint: Ease regulatory burden on lenders
By Jeff Olson
Credit unions and other small community financial institutions help keep the U.S. economy humming. More than 110 million Americans are members of credit unions, and in the Dakotas, approximately 487,000 citizens are credit union members that rely on their local financial institution for their banking services.
Sadly, since the enactment of the Dodd-Frank Act in 2010, many of these small institutions have been under attack. In order to monitor the big banks responsible for the financial crisis more closely, the law has largely prevented these titans from engaging in the sort of predatory behavior that almost took down the American economy.
However, in the years since, a growing number of credit unions and community banks have been ensnared by a costly web of federal regulation. Those regulations are eating up one of every six dollars credit unions spend on operations each year — or $6.1 billion in total. Some smaller financial institutions have simply been unable to shoulder these additional costs.
Since 2009, about 2,000 credit unions and 1,500 community banks have closed. This, when not a single dime of taxpayer money has ever been used to "bail out" a credit union. Further, the competition provided by credit unions and community banks helps keep bigger financial institutions honest. Fewer choices for consumers, of course, mean higher prices.
Fortunately, Congress is finally standing up for small lenders. The Senate recently passed legislation that would exempt credit unions and smaller community financial institutions from the most burdensome of these federal regulations. The House followed suit this week, voting to approve S. 2155 and the measure now heads to President Donald Trump for his signature.
S. 2155 — the Economic Growth, Regulatory Relief and Consumer Protection Act — is a bill that would offer credit unions and smaller community banks relief from the most burdensome of Dodd-Frank's regulations. In so doing, it would free up credit unions to divert spending away from regulatory compliance — and toward their member consumers. The bill would streamline the process for securing a mortgage. It would also tweak how some loans to landlords are categorized. That move alone would unlock an extra $4 billion for credit unions to lend to small businesses.
It is important to note that the bill doesn't touch restrictions on huge Wall Street banks — the ones that actually pose a systemic risk to the economy — or interfere with regulatory agencies like the Consumer Financial Protection Bureau.
Credit unions are organized as nonprofits. They reinvest their earnings in their members, through lower fees and better rates. With the House formally green-lighting S. 2155, we are finally on the path to easing the regulatory burden on the lenders that power so much of America's economy.
Jeff Olson is CEO of the Credit Union Association of the Dakotas, a trade association that serves 73 credit unions.