Mounting regulations intended to benefit consumers have burdened credit unions so that the cost of compliance may impede growth and bring sweeping changes to the financial products and services desired by consumers.
CLO Tim Rowe of Member One FCU, a Virginia-based credit union with $560 million in assets, said that the regulations have made it harder for Member One to serve the needs of its customers. Though Member One has not had to make any cuts in programs or services, Rowe maintains that the time spent researching and complying with the regulations has negatively impacted lending, according to Credit Union Times.
Last year, Rowe said, Member One reached 6.16 percent loan growth, but Rowe also questions whether the credit union could have achieved eight or 10 percent growth minus the regulations.
“How many more of our members could we have helped with a better focus on our member and less on implementing new regulations?” Rowe said, Credit Union Times reports.
Brad Smith, the vice president of strategic development for Pacific Marine Credit Union, said that a loophole in Reg E opt-in requirements led to a noteworthy loss of fee revenue for the $612 million credit union. Members of Pacific Marine, half of whom are between the ages of 18 and 24 have found that they can purchase up to $100 worth of gas and see only a $1 approval on their debit card statements. This results in negative checking accounts balances with little opportunity for Pacific Marine to recoup the losses through fees, according to Credit Union Times.
Smith said that it is frustrating to see members that purposely play the system subsidized by other customers who follow the rules, often with higher loan rates and less free services.
“Every time the government tries to regulate financial responsibility, some people will still behave irresponsibly anyway, and now they can do it for free,” Smith said, Credit Union Times reports.
Rowe also said that the number of disclosures at present is overload.
“In many respects, the consumer is now so overloaded with required compliance language that most of it is actually ignored,” Rowe said, according to Credit Union Times.