March 20, 2018
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Burdensome Dodd-Frank regulations are crushing Maine credit unions

J. Scott Applewhite | AP
J. Scott Applewhite | AP
The Capitol is seen in Washington, March 6, 2018, as the Senate is preparing to roll back some of the safeguards Congress put into place after the financial crisis that rocked the U.S. a decade ago. Several Democrats facing tough re-elections this fall are joining solid Republican backing of an effort to alter some key aspects of the Dodd-Frank law.
By Tina Jamo, Special to the BDN

Congress could soon make it easier for Maine families to buy homes and start businesses.

In December, a Senate committee approved a bipartisan billco-sponsored by Maine Sen. Angus King and supported by Sen. Susan Collins — that would scale back arduous reporting and accounting regulations for credit unions and community banks. Cutting that red tape would reduce the cost of loans for people throughout Maine — and the rest of the country.

Now the bill will head to the full Senate for consideration.

Following the 2008 financial crisis, lawmakers imposed expansive regulations on the financial services industry, chiefly through the 2010 Dodd-Frank Act. The thinking behind the rules was sound — the government wanted to clamp down on the excessive risk-taking that caused the crisis. But lawmakers cast their net too wide with Dodd-Frank and imposed restrictions on lenders that had nothing to do with the financial crisis — especially credit unions.

Unlike traditional banks, credit unions are nonprofits owned by their members. Any profits are returned to members in the form of lower-priced loans. Compared with commercial banks, credit unions offer higher interest rates on savings and lower rates on loans and credit cards.

Here in Maine, credit unions have nearly 700,000 members. By design, these institutions are intertwined with their local communities; it’s part of our mission. At my credit union in Millinocket, we know our members and we’ve worked hard to maintain a stable organization for them. And while numbers are important, our members remain our most valuable asset. Our story is not unique across credit unions in Maine. For instance, since 1990, Maine’s credit unions have raised more than $8 million for a campaign to end hunger in the state.

Community lenders like us are getting crushed by Dodd-Frank. The average credit union’s regulatory compliance costs have jumped 70 percent in the past decade. Roughly 1 in 4 credit union employees spends a “significant” amount of time filling out regulatory paperwork.

These federal rules are also unfair. Big banks caused the Great Recession by pushing loans onto folks who couldn’t repay them. But credit unions lent responsibly, and Maine credit unions are proud that we were able to continue to support Mainers by lending throughout the financial crisis. In 2009, the mortgage delinquency rate at credit unions nationally was less than 2 percent, compared with 9 percent at banks.

The bill that just passed out of the Senate Banking Committee — S 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act — provides credit unions and other community financial institutions with significant relief from ill-targeted federal regulations.

First, it allows credit unions to step up their lending to small businesses by fixing a faulty loan classification system thanks to a bill supported by Collins. Currently, credit unions face a cap on how much they can lend to businesses. And certain credit union loans to landlords are classified as business loans, even though they’re considered real estate loans at conventional banks.

The bill fixes this discrepancy. And that would allow credit unions to lend to more of Maine’s 141,000 small businesses, which employ more than half of the state’s private workers.

The bill would also lower the cost of a mortgage. Lenders who make fewer than 500 mortgages annually — many of which are credit unions — would no longer have to comply with cumbersome, and costly, mortgage disclosure requirements. They can pass the savings along to homebuyers.

The bill tailors regulations for smaller financial institutions, but it also goes a step further and helps protect our elderly members by providing legal protections for properly trained financial services employees who disclose concerns about financial exploitation of senior citizens. This part of S 2155 comes from a bill started by Collins that builds upon the Senior$afe program, which trains tellers to spot and report red flags of elder financial abuse. This is an issue credit unions care deeply about, and we thank Collins for bringing it to the national stage.

This bipartisan, common-sense and targeted legislation will help credit unions serve our communities, and we hope to see it pass in the Senate this week. This is about Main Street, not Wall Street.

Tina Jamo is the president and CEO of Katahdin Federal Credit Union, which is headquartered in Millinocket and has a branch in Island Falls.

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