Minimal Change for Credit Unions in Obama's Initial Regulatory Reform

Yesterday, President Obama announced his plan to overhaul regulation in the financial industry. A New Foundation: Rebuilding Financial Supervision and Regulation is an 88-page proposal, laying out the structures and functions of new and old regulatory bodies. The proposed reforms are aimed at filling in gaps in regulation and increasing consumer protection. The biggest changes made in the proposal are through the restructuring of the regulatory and supervisory bodies. A new agency, the National Bank Supervisor (NBS), will oversee federally-chartered banks, leaving the FDIC to supervise state-chartered banks. The proposal also creates an umbrella agency, the Financial Oversight Council, which is comprised of the leadership from the NBS, FDIC, NCUA, SEC, CFTC, FHFA, FOMC, the Treasury Department, and a new consumer protection agency.

Despite the overwhelming re-structuring of financial industry oversight, the credit union industry is largely untouched by the reforms. The draft states:

Under our proposal, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) would maintain their respective roles in the supervision and regulation of state chartered banks, and the National Credit Union Administration (NCUA) would maintain its authorities with regard to credit unions. The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) would maintain their current responsibilities and authorities as market regulators, though we propose to harmonize the statutory and regulatory frameworks for futures and securities.

While the NCUA remains an independent entity, Obama plans to create the Consumer Financial Protection Agency to regulate products offered by both banks and credit unions such as mortgages and credit cards. The agency would be charged with enforcing consumer financial protection statutes like the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA). This aspect of Obama’s proposal is the most likely to have some impact on the credit union industry if approved by congress. Overall, it appears that credit unions will be able to continue day-to-day business without many changes due to new regulation.