The United States just witnessed the largest run on regional banks that we’ve seen in 15 years, ultimately leading to the demise of a few. For months, we have teetered on the cusp of a recession with skyrocketing inflation. America is in desperate need of economic stability and consumers need guidance on how to best manage their finances in such an uncertain environment.
This is why it is mind-boggling that the Consumer Financial Protection Bureau (CFPB) continues to wage its war on Main Street. For the past two years, we’ve seen a continuous stream of regulations that hurt Main Street small businesses and underserved communities – the exact constituencies the CFPB was created to protect.
The Bureau has worked a strategy to gaslight consumers, the media, and many Members of Congress with deceptive messaging. Just last week, the Bureau moved forward with two separate rulemakings: “Ending discrimination in small business lending” and “reining in excessive credit card late fees.” On paper both sound good, but they ultimately are two battles in the CFPB’s war against Main Street.
Let’s start with the Bureau’s rule to “protect” small business lending. Shoving across the finish line – with minimal effort to address real concerns from Main Street businesses and community financial institutions – a regulation that will ultimately kill small business lending as we know it. Rather than ending discrimination in lending, it’s only going to increase it: The imposed regulation will add significant compliance costs and burdens on community lenders, dissuading many small credit unions from making these business loans all together. This will be catastrophic for rural towns and underserved communities – where credit unions and community banks are the only lenders left that can effectively support Main Street businesses.
Next, with its proposal to lower the amount a credit union can charge on credit card late fees to $8 – the same amount as a Subway Footlong – the CFPB is effectively incentivizing consumers to skip out on paying their bills, pushing them into a never-ending cycle of debt and destroying their credit history. Moreover, credit unions, as not-for-profit institutions, won’t be able to cover the costs of these delinquencies, and recent data from the National Association of Federally-Insured Credit Unions (NAFCU) shows that credit unions will be forced to reduce or limit credit builder products, limit their ability to provide lines of credit to high-risk borrowers (including in underserved communities), eliminate no-fee checking and savings products, and cut back on much-needed financial literacy programs. As a result of this uninformed policy, the costs of financial services will increase for all consumers.
Both of these policies are a clear distraction from what the CFPB was chartered to do. The Bureau was created in response to the 2008 financial crisis, with the mission of rooting out bad behavior in the financial industry. But instead, with policies like these, they’re encouraging it. Credit unions – who prioritize serving the underserved through access to safe, affordable financial products, who promote financial literacy education where it’s needed most, who proclaim the importance of integrity and doing what’s right for the members they serve – have seen enough.
Credit unions and the 135 million members they serve don’t need more regulations that will stifle them. They need opportunities. According to data from the Federal Deposit Insurance Corporation, over the last 10 years 11,000 bank branches have closed their doors across America. Credit unions are opening theirs and filling this void because their mission is one of integrity and honesty – because they believe financial success is possible for every member they serve. NAFCU Member Mike Wilson of Members 1st Federal Credit Union testified before a House Small Business subcommittee last week. When asked why the credit union offers concierge-like services to its business members to help ensure their success when it’s not required by law, he simply replied, “because it’s the right thing to do for the communities we serve.”
It is well past time that the CFPB be reined in and held accountable. They are using empathetic messaging to manipulate policies that are detrimental to consumers and the greater financial stability of our economy. At a time when Americans need help the most, instead of focusing on promoting financial literacy the CFPB has doubled down on their war against those they claim to protect.
NAFCU is calling on House Financial Services Chairman Patrick McHenry and Ranking Member Maxine Waters as well as Senate Banking Chairman Sherrod Brown and Ranking Member Tim Scott to take legislative action to protect consumers from these disastrous policies and hold the Bureau accountable to its intended mission created by Congress. It’s time to put an end to this war on Main Street once and for all.
