As Prepared for Delivery on December 12, 2019
Please allow me to offer a few thoughts on consumer protection at the NCUA beginning with an analysis of the seemingly sage advice of, “if it ain’t broke, don’t fix it.”
This aphorism keeps us from wasting time and resources on things that “ain’t broke.”
It also appears to fit nicely with the consumer protection examination and supervision mandate of the NCUA. After all, the agency has experienced no Well Fargo type frauds. Consumer complaints are also trending at manageable levels and credit unions respond timely to the agency’s consumer protection actions.
So, everything appears ok. But is it?
Let me reframe the question. Under the “ain’t broke” approach the NCUA would wait and take action after something “breaks.” Specifically, in the consumer protection context, the agency would wait until consumers are cheated and defrauded.
Does this approach make sense for a regulatory agency? That is, should the NCUA sit on its hands and wait until there’s a clear and demonstrable consumer protection problem before taking action?
In other words, the agency should not regulate reactively, but should work proactively to anticipate future problems. This approach requires adequate resources and thoughtful leadership.
Let me be clear, our consumer protection staff has done a fine job. They, however, deserve the resources to act proactively to continue to protect consumers.
I have advocated for the allocation of additional resources to the agency’s consumer protection staff. In doing that, I fully appreciate the differences between credit unions and banks and that our regulatory protocols should reflect those material distinctions. We should not simply copy the examination and supervision programs of the banking agencies that are directed to the specific risks presented by the business models of both community banks and the gargantuan too-big-to-fail financial institutions. Credit unions are not banks.
Instead, we should specifically tailor and target our consumer protection examination and supervision activities to the actual, objective risks presented by credit unions to their members and not the unique industry specific risks presented by banks to their customers. Credit unions are not-for-profit, member owned cooperatives whose reason for being is to serve their members who are also consumers. Credit unions do not operate with an equity shareholder class and their what-have-you-done for-me-lately investment philosophy. Credit unions, accordingly, have every economic incentive to treat their member consumers well.
Consumer protection is endemic to the NCUA and credit unions as the typical credit union’s business model focuses almost entirely on extending credit and other financial services to its member consumers. Treating consumers inappropriately is not only wrong and in violation of applicable law, it’s bad for credit union business and undermines the agency’s safety and soundness mandate. As such, it’s imperative that we provide the agency’s consumer protection staff with the resources necessary to continue to proactively safeguard credit union consumers. Consistent with my first Board statement in 2014, we should not hesitate to add staff that are necessary to the fulfillment of our safety and soundness mission provided we can justify the expense in an objective and transparent manner. We should also, at all times, remain mindful and respectful that the NCUA is funded with “other people’s money,” the limited resources of the credit union community.
As a CPA for over 40 years I appreciate that the Board’s failure to approve an updated budget for 2020 would create an administrative nightmare for the agency. The proposed 2020 budget reallocates funding among different offices and categories and increases the operating and capital budgets so as to permit the agency to continue its core mission of safety and soundness. The budget for 2020 approved last year is simply inadequate for the task at hand.
Given the regrettable impasse between the other two Board offices, I will vote to approve the proposed 2020 budget and maintain the operations of the agency. Let the record reflect, however, that I strongly support the allocation of additional resources so as to permit the NCUA to continue to regulate consumer protection in a sensible, proactive manner. The 120 million or so Americans who rely on credit unions, and our staff who carry the burden of protecting those consumers, deserve that commitment.
It’s entirely unprincipled to wait until the agency’s consumer protection examination and supervision policies and procedures are “broke” before we “fix” them. Although reasonable minds may differ concerning certain aspects, I will continue to endeavor to find a collegial and collaborative path forward that continues to protect consumers without placing an unnecessary regulatory burden on credit unions. As Mick and Keith told us back in 1969, “you can’t always get what you want, but if you try sometime you find, you get what you need.”