Credit union boss: Banking bill was just the start

The 5,573 federal credit unions, which were extending about $1 trillion in loans at last count, have a few advantages in petitioning the government. They’re mostly small, and located throughout the country. They’re nonprofit, owned by their members. And, as they’re quick to argue, they weren’t responsible for the financial crisis.

The Credit Union National Association represents the interests of credit unions from its brand new headquarters in Washington’s Navy Yard neighborhood, just south of the Capitol.

Jim Nussle, the group’s president and CEO, sat down with the Washington Examiner to talk about what credit unions want from Congress and from the administration. At the top of the agenda: Reform the Consumer Financial Protection Bureau, the agency that regulates credit cards, mortgages and other products. The CFPB was created by the 2010 Dodd-Frank law to have broad authority over consumer finance and the power to act unilaterally. In recent months, it’s been helmed on an acting basis by Mick Mulvaney, President Trump’s conservative budget director who has pursued a deregulatory agenda.

Nussle, who served as the director of the Office of Management and Budget under President George W. Bush and also as the chairman of the House Budget Committee as a representative from Ohio, also discussed the broader trends facing credit unions and the economy.

Washington Examiner: Well, let’s start with the newest news, if we could: The bipartisan regulatory relief bill signed into law. Can you talk a little bit about what that means for your members concretely and how it’s going to affect the credit union industry?

Nussle: Yeah, well, the good news is that it’s the first piece of regulatory relief legislation that has passed since Dodd-Frank. And it’s been a long time coming for us. Since Dodd-Frank, we’ve been advocating for relief in a number of different areas. We’ve been asking Congress, and for that matter the CFPB and others, to use the authority within Dodd-Frank to make some adjustments.

When I served in Congress, I can tell you that we would pass legislation routinely in a bipartisan way. Technical corrections, we called them. But this has been a long drought of either lack of bipartisan legislation — lack of legislation at all — and lack of relief for some industries that are a pretty important linchpin in economic development across the country.

Washington Examiner: Can you give an example of what that regulatory relief is going to mean for your credit unions and for their customers?

Nussle: Well a lot of it just has to do — let me not overstate the importance of the legislation, either. Really, it’s a small piece of a bigger puzzle of challenges. But the fact that we were able to get it done, the process that this went through, and frankly the fact that it was bipartisan in the environment that we’re in right now, is probably the bigger headline than whether or not this had that great an impact for the credit unions.

Yes, it did relieve some burden, helped free up some capital, gave them some room in order to do things that heretofore they weren’t able to do, all of it toward creating jobs and economic development. But I gotta tell you, in the grand scheme of things, this was not even close to what Dodd-Frank was. And it wasn’t even close to what was in the past considered a technical correction.

And that’s what’s so frustrating about the atmosphere in Washington right now.

Washington Examiner: So what’s next on that agenda, then? What are some of the bigger items that you’d like to see in terms of regulatory relief?

Nussle: We’d actually like there to be some certainty in the marketplace with regard to regulatory platforms going forward.

So for instance, we’d like to know what the future of the CFPB is even going to be. I mean, part of the reason that it is so uncertain, and it’s been you know bantered back and forth in sort of a partisan way, is that it has this one-director sort of system. And it has the ability as a result to blow with the political winds, rather than provide certainty for an industry that needs some oversight on the one hand but needs certainty on the other.

And so we really believe that the reasons for Dodd-Frank are still there, particularly for the very largest institutions. But some of the ones that have proven themselves, like credit unions, to be pro-consumer even ever before they heard of the CFPB, we should be rewarded in that kind of a system, as should banks and others that do a good job.

Washington Examiner: What specifically are you looking for from the CFPB?

Nussle: We’d like a commission system. We’d like to establish a commission for the CFPB going forward or for the bureau of consumer — whatever it’s going to be called going forward. We think that, for instance, a five-member commission would be a much stronger message to the certainty of the future than having it blow with the political winds if you will or the predilections of a single director.

Washington Examiner: It looks like at this point that is off the agenda for this Congress, in all likelihood. What do you have to do to be in a position to have lawmakers hear you on that?

Nussle: Well, I suppose if you’re a betting person, you would say everything’s off the agenda for this Congress right now, just because it’s turned very partisan and it’s turned toward the midterm elections.

But we recognize what we did in regulatory relief took us two, three years to build toward. So while we know that’s not maybe on the agenda for June, we have to keep building. We have to build the case for it, we have to build our grassroots strength, we have to talk to our members of Congress and senators, we have to be advocates to the administration. All of those are ways that we can, I believe, get us prepared, get us ready for what may come next.

Washington Examiner: OK, and talking about this environment and talking about what you may be able to accomplish maybe not with Congress but with the administration — how’s it been working with the Trump administration? What do you think has been achieved so far, and what can you get done administratively working with those people?

Nussle: President Trump came in with a regulatory relief message and agenda, and he’s been good to that word. He’s definitely provided us a forum; when I met with President Trump together with a number of credit unions, we talked about some of those specific issues that were pain points.

At that moment, it was in the midst of tax reform. And the president was quite appropriately focused on getting his tax reform passed, he wanted to make sure it stimulated the economy. But our message was: You have the opportunity, whether it’s in big cities or frankly across the country in small communities as well, to create a lot of jobs just allowing us to do our job. And particularly giving reward to those who weren’t part of the problem in 2008. I mean, credit unions didn’t cause the crisis of 2008. That’s why we went in with an agenda that says help us help America be great again, help us allow America to create jobs again.

Washington Examiner: And so how do you think the result has been so far? Is that just a matter of things taking time? Have you seen those concrete results that you wanted to see?

Nussle: It’s a little bit of both. Certainly we’ve seen positive momentum from Acting Director Mulvaney. As a former OMB director myself, I know that he has only a certain amount of things he can do and that he can actually affect from the position of acting director, or from the position of OMB, or from the White House for that matter without a directive or support or legislation from Congress.

But he’s done those things. He’s tried to give us an audience and the hearing if you will, the listening that he needed to do to find out what could be done, what does the future look like for financial institutions and I give him a lot of credit for that.

Washington Examiner: You mentioned the tax reform. Have you seen any effect of that to date on your industry? How’s that working through the system, what’s been the impact, and how would you review that whole situation?

Nussle: Probably the jury is still out on exactly how America is using that tax reform, that tax refund if you will.

I’m sure there are some that are reinvesting it in their companies. I’m sure there are some who are putting it toward dividends and providing it for capital for the future.

I’m sure from a business standpoint, the jury is still out. From a day-to-day American, we see at credit unions a lot of folks that are on the front lines of what I refer to as mud puddle issues for families and individuals across the country. That’s balancing their checkbook, paying the bills sometimes. Getting from one job to another. We hear the statistics all the time about half of America not being able to come up with $400 to, you know, deal with an emergency.

Well, an American in that kind of situation — a family member, single mom, whatever it might be, head of household — are most likely not getting a tax refund because they maybe weren’t paying enough taxes to even get the refund. So everybody’s in a different situation, so we see the front line of American families that are, as consumers, dealing with a lot of challenges.

Washington Examiner: And can you explain where the term “mud puddle” comes from?

Nussle: Well, that’s kind of a term I grew up hearing and using. We all fall into those mud puddles.

And the difference between the mud puddles that you or I might fall into in some financial institutions — credit unions get into the mud puddle with you. Most of them have been there. They see a lot of folks that are on the front lines of those financial challenges. And they’re willing to be as good a financial partner as you can find, not only in helping you make your dreams come true, but also how do you get to the point where you can even dream again?

Washington Examiner: Let me ask you about some of the broader pressures that are facing the industry. You mentioned Dodd-Frank. That’s a 2010 law that changed a lot of things in the financial industry, but there are even longer running trends than that that have been affecting small institutions particularly. What do you see right now as the longer term pressures that your members face?

Nussle: Well, first and foremost is the regulatory burden. Our study shows that it’s over $6 billion annually that is locked into the regulatory system,. The regulatory burden, paperwork-wise, is almost like having to read 17 Harry Potter novels as an example. That’s how many pages there are. And it’s not as good as Harry Potter, obviously.

Just dealing with that is huge. Particularly for a small institution, of which most credit unions are. That’s number one.

We’re with the pressures of acceleration that are out there that Thomas Friedman described in his new book, Thank You for Being Late. And that is this whole age of acceleration and the fact that we’re moving faster — technology, the demand for real-time, on-time service is all something that financial services is dealing with.

That’s one. Second is talent. We, like many, in an economy that has such a low unemployment certainly needs to be out in the marketplace competing for talent.

And the last one I would say is we are all concerned about the data breaches we’ve seen from merchants lately that have affected places that oftentimes affects our members, as we have to re-issue a credit card.

Those are the agenda items that I think our credit unions are looking at as they continue to stay relevant for the future.

Washington Examiner: As far as your customers go, you see the people coming in, you see their credit needs, you see their economic situation. Where do you think things are headed, I guess, just more broadly economically speaking regarding the availability of credit? Do you see greater need? What kind of pressures are they facing?

Nussle: Thankfully, the demand for credit and the recognition that that system is safe is a good thing, particularly coming out of the crisis of 2008. Credit unions stand in the breach if you will because so many banks are refusing to serve some of those communities, some of those smaller borrowers, some of those smaller depositors. They’re looking for the big accounts, and that’s not necessarily all that surprising.

We’re there, in many instances, as the community financial services for many places around the country. Otherwise they wouldn’t be served, or, they’d be going to lenders that are quite predatory. That charge either unregulated situations or they’re in a charging situation where they are able to demand exorbitant amounts of interest in order to just get into the credit market.

What we know as we deal with our members is that you’re going to go find the money. People are, if they need to deal with a family crisis, maybe it’s a car they need to replace, or being able to get to work, or putting food on the table, they’re going to go out, and they’re going to figure it out. And credit unions stand there as a way to be a safe place with a good financial partner to figure that out. But we know there are other places that are in it to make money in those situations and they’ll figure it out there, too, but it will most likely be anti-member, anti-consumer. As opposed to ours, where the consumer is actually, they own the place. And we’re not there to make money off of them, because we’re not for profit.

You know, a lot of folks are doing well. But there are still many in America that are living week to week, and paycheck to paycheck. And they may have a job, they may not be in the unemployment rolls, but they’re underemployed. They don’t have the job they want or for that matter the one that they trained for, right, because it’s been eliminated or it’s not available in their communities. So that’s what we see as struggles.

Washington Examiner: Let me follow up on that point. For people with not a great credit history, or poor credit, Mulvaney and some of the other regulators in place right now are looking at having more banks get into the business of offering short-term, small-dollar loans, maybe competing in that payday space. How do you see that affecting the credit union industry?

Nussle: Well, we do it already. I mean, we are already in that space and have a regulated history of that, do a good job under our own regulator. We have something called the [Payday Alternative Loans] program as a result and we do that already. And I think we’re already a trusted short-term, small-dollar lender in that space. We can always extend that even further.

But I think the real challenge is your first part. And that is, getting qualified for that when your credit is challenged.

What we provide in addition to just having something available, is that we provide the education, the training for financial capability, so that in addition to saying “yes” to you if in fact you’re in that situation, we can say “yes, and here’s some help to make sure you don’t go back. You don’t slip. You don’t go back into the mud puddle that maybe you found yourself in.”

Or, if we say “no,” we don’t say “no, that’s the end of the conversation, go somewhere else.” We say, “not yet.” We say, “you know what? Help us understand how you’re going to make sure that what we’re providing gets you back on your feet and allows you to continue to make that payment to get out of debt, to begin saving again,” because that’s what so many Americans want to be able to do.

So financial capability needs to go along with that short-term, small-dollar, I’m-in-trouble-I-need-help kind of situation. Because most of the time, they need that financial help.