2023 Legislative Outlook Predicts More Compromise

By Sheryl S. Jackson

Consumers and credit unions benefit from dual-party control

Voter turnout for the November 2022 elections set records for a midterm, and now that all of the television ads, direct mail pieces and social media posts have disappeared, the outlook for legislative and regulatory actions throughout the next two years is positive.

“The results of the 2022 midterm elections were a net benefit for credit unions,” said Greg Mesack, senior vice president of government affairs at NAFCU. When the different branches of the government are controlled by different parties, everyone is forced to work together, he explained. “This prevents excessive action because each side must compromise.”

As an example of the risk of single-party control, Mesack pointed to the IRS reporting provision originally included in the Build Back Better Act that would have required financial institutions to provide information on any account with transactions of $600 or more. “This would have been a massive invasion of privacy of our members as well as an immense task for credit unions to manage. Fortunately, the provision did not make it into the final bill, but it was a single vote that stopped it,” he said.

“From the credit union perspective, our industry enjoys broad bipartisan support, which means we’ll continue to see different bills moving forward,” said Brad Thaler, vice president of legislative affairs at NAFCU. “It will be difficult to pass bills into law with the tight margins in each house, but bipartisan support in the House gives bills a chance in the Senate.”

Even with bipartisan support, Thaler does not anticipate any major reforms in regulatory relief, but does believe that smaller changes might provide relief in some areas. “Another area with support from most lawmakers is fintech and cryptocurrency,” he said. “We should see some consensus building early in the session around stablecoin oversight bills that have been introduced.”

Another issue that does not break along party lines is privacy and data security, said Thaler. “These issues are less partisan and there is always more debate to reach a consensus,” he said. “We’re keeping an eye on proposed legislation that could affect credit unions.”

One continuing issue is the discussion related to interchange fees. “We are watching proposed legislation on routing requirements for credit card transactions carefully, but the change in House leadership will hopefully make that bill harder to get across the finish line,” said Ann Petros, NAFCU’s vice president of regulatory affairs.

A positive aspect of the Republican-controlled U.S. House of Representatives is the oversight of regulatory agencies such as the National Credit Union Administration and the Consumer Financial Protection Bureau. “We anticipate more discussion of regulatory relief for credit unions in the upcoming years,” added Mesack.

Petros agreed and said, “Republican oversight will provide the necessary guardrails for the CFPB. This should reduce the amount of rule-making by press release and result in the agency following the rule-making process.”

An issue that NAFCU is following and commenting on is a proposal to reduce the safe harbor for late fees, said Petros. “CFPB is looking at various revenue streams including late and overdraft fees and financial organizations that are dependent on these fees for revenue—taking advantage of consumers,” she said. The challenge for credit unions is the fact that they already have the lowest available fees and eliminating or cutting them makes it impossible to be compensated for the time, staff and technology needed to collect monies due, she explained.

NCUA Leadership to Change

A Democrat-controlled Senate will affect NCUA leadership. “Rodney Hood’s term on the NCUA Board expires in 2023, so it is likely that a Democrat will be quickly confirmed to replace him,” said Petros. The current Board is comprised of two Republicans and one Democrat, which means the replacement will leave one Republican on the Board. “We expect the change to usher in enhanced focus on fairness and equity, which will likely be reflected in supervisory priorities,” she said. “We also are watching to see what it means for the NCUA budget. Will more money be required from credit unions in 2024/2025?” NAFCU is focused on new requirements to fund the agency’s operations budget because every dollar a credit union sends to NCUA is one less dollar to help add new services for members, she explained.

A shift on the NCUA Board also changes the dynamic surrounding another issue—third party vendor authority. While the agency would like to directly examine third party vendors used by a credit union, a congressional amendment to the Federal Credit Union Act. “Chairman Todd Harper has tied the issue to cybersecurity, but NAFCU believes that it is unnecessary, and duplicates work already done by other agencies,” said Petros. “The Federal Financial Institutions Examination Council (FFIEC), of which NCUA is a member, provides access to that information that is gathered by other regulatory agencies.”

Overall, the results of the midterm election have the potential to benefit credit unions and consumers, said Petros. “The checks and balances of a divided government should result in legislation that considers the needs of citizens and small businesses due to the need for negotiation and compromise to move the ball forward. This is a more productive approach that creates good bills with a positive outcome for everyone.”