Advocacy Outlook - RKL LLP · Preserve favorable tax treatment of credit unions. FierceCUNA/League 360° advocacy. ... class of covered persons, service providers, or consumer financial

AdvocacyOutlook

PresentedtoRKL’s2016CreditUnionSeminar

October2016

OurAdvocacyGoalTocreateamorefavorableoperatingenvironmentforcreditunionstoservetheirmembersthroughtheremovalofregulatorybarriersandexpansionofcreditunionpowersandopportunities.

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TrendsImpactingCreditUnions

CreditUnionTrends• Verystrongmembershipgrowth• Highandincreasingloangrowth• Vastlyimprovedassetquality• Highearnings• Continuingconsolidation

PublicPolicyTrends• Post-CrisisRegulatoryShockContinues• HistoricLevelofCongressionalGridlock• AnElectionUnlikelytoChangeDynamics• ChangingCreditUnionSystemRequiresChangeinAdvocacyApproach

Whatdoesthismeanforcreditunionadvocacy?• AhealthycreditunionsystemkeepsCongressfromexercisingtoomuch scrutinyoverthesystem,theshareinsurancefund,andtheregulator.• Agrowingcreditunionsystemenhancesourvaluetoconsumersandsmallbusinesses,increasingourrelevanceintheeyesofpolicymakers.• Aconsolidatingcreditunionsystemmeansthatwehavemore“large”creditunionsandfewer“small”creditunions,requiringustomanagethepotentiallyimpactonourgrassrootscapability.

OurAdvocacyAgenda

Reduce regulatory

burden facing credit

unions

Expandconsumer and small business

access to credit unions

Engage in public

policy developments on payments

and data security

Preserve favorable tax treatment of credit unions

Fierce CUNA/League360° advocacy

NationalCreditUnionAdministration

Congress and State Legislatures

Consumer F inanc i a l P ro tec t i on Bu reau

Regulatory Changes

FederalReserve

Since2007…200+

DepartmentofLabor

Federa l Communicat ions Commiss ion

RemoveBarrierssoyoucanbetterserveyourmembers

SampleofRegulatoryChangesSince2014RiskBasedCapital

HomeMortgageDisclosureAct

Truth-in-LendingAct/RealEstateSettlementProceduresActIntegratedDisclosures

Remittances

MilitaryLendingActArbitration

IncentiveBasedCompensation CyberSecurityFramework

MemberBusinessLending

OccupancyRule

FieldofMembership

CustomerDueDiligence

StudentLoanServicing

IOLTA

SameDayACHSmallEntityDefinition

FixedAssets

RuralandUnderservedDefinitions

PrePaidAccounts

FHLBMembership

FloodInsurance

CorporateCreditUnions

TelephoneConsumerProtectionAct

AssetSecuritizationandSafeHarbor

AssociationalCommonBondFOMRequirements

QualifiedMortgageRule

CheckCollectionandReturns

Impact of Regulatory Burden on Credit Unionsin 2014

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Buildingon2015Accomplishments…FieldofMembershipandMBLRelief

Privacy Notification Modernization

Pr i va te l y i n su red c red i t un ions e l i g i b l e to j o in FHLBs

Bi l l s approved by HFSC

Advocatedincourton

TaxStatusPreserved20+

Risk-BasedCapitalImprovements

Data breach, Interchange, and TCPA

Kept S ta te Treasu re rs o f f ha rmfu l Ch ip & P IN Mandate Le t te r

Enac ted new de f in i t i on o f ru ra l a rea fo r CFPB mor tgage ru l e s

WeAreMakingProgressin2016…Calendar-YearExamRequirementEliminated

Overhead Transfer Rate Methodology Published

F ina l F i duc i a r y Ru le I n c luded CUNA- sought changes

House and Senate Members Wrote CFPB on Exemption Authori ty

StateCreditUnionActImprovementsin:

TaxStatusPreserved399

FHLBMembershipRuleImproved

Alabama, Co lorado, F lor ida , Georg ia , Ind iana, V i rg in ia and Wiscons in

TRIDReopened

RegZSmallCreditorExemptionInterchangeVictoryin

TexasCourt

CongressionalGridlock:LegislationEnactedAsaPercentageofLegislationIntroduced80th- 112thCongresses

7.49%

2.20%

4.20%

6.32%

4.31%

3.49%

4.67%

3.28%2.80%

1.95%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

0

5000

10000

15000

20000

25000

30000

35000

80thCongress

(1947-1948)

83thCongress

(1953-1954)

86thCongress

(1959-1960)

89thCongress

(1965-1966)

92ndCongress

(1971-1972)

95thCongress

(1977-1978)

98thCongress

(1983-1984)

101stCongress

(1989-1990)

104thCongress

(1995-1996)

107thCongress

(2001-2002)

110thCongress

(2007-2008)

Do-NothingCongressDoesNotMeanNothingWillBeDoneinWashington

FinalYearRegulatoryPush

There is an average of 25% more regulatory activity in the 8th year of a presidency than the average of the first seven years.

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CurrentAdvocacyIssuesCreditUnionPowers

• FieldofMembership• MemberBusinessLending• SupplementalCapital/Risk-Based

Capital• PublicDeposits• PrizeLinkedSavings• FederalCreditUnionActUpdate• StateCreditUnionActUpdates

ExaminationandSupervision• ExaminationFrequencyandFairness• SupervisoryModernization• TransportationNetworkCompany

Issues• PatentReform• IOLTA/PrepaidCardInsurance

Coverage• OperationChokepoint

ConsumerProtection• OverdraftProtection• PaydayLending• TelephoneConsumerProtection• PrivacyNotification• DOLFiduciaryDefinition• CFPBStructuralReform• TILA/RESPA• HMDA• QualifiedMortgageRule• DebtCollection• StudentLending• MilitaryLending• DOLOvertimeProposal

TaxandBudgetPolicy• FederalTaxExemption• StateTaxExemptions• LocalTaxIssues• UBIT• FATCA• IRSDisclosures• NCUABudgetTransparency• CongressionalBudget• Appropriations

Housing• FederalHomeLoanBankParity• GSEReform• FloodInsurance

Payments• Interchange/SurchargingAmicusBriefs

• Data/CyberSecurity• FasterPayments/SameDayACH

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Our Advocacy Strategy• Our goal is to influence public

policy to create the best possible operating environment for credit unions.• Regulators are ultimately

responsible to Congress.• During gridlock, our ask is for

Congress to influence CFPB, NCUA and others.

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UsingCongresstoReduceRegulatoryBurden• CFPBExemptionAuthority

• Stivers-SchiffLetter• Donnelly-Sasse Letter• AppropriationsReportLanguage

• ShelbyandHensarling RegulatoryReliefBills• CFPBStructuralReform• CFPBMortgageRuleMakings• NCUABudgetAct• FHLBAccess• OperationChokepoint

CFPBExemptionAuthority– Section1022(a)(3)(A)TheBureau,byrule,mayconditionallyorunconditionallyexemptanyclassofcoveredpersons,serviceproviders,orconsumerfinancialproductsorservices,fromanyprovisionofthistitle,orfromanyruleissuedunderthistitle,astheBureaudeterminesnecessaryorappropriatetocarryoutthepurposesandobjectivesofthistitle,takingintoconsiderationthefactorsinsubparagraph(B).

PendingandAnticipatedRegulatoryChanges

NCUA• FieldofMembership(NearFinal)• CallReportModernization/ExaminationEfficiency(InProgress)CFPB• Arbitration(Proposed)• SmallDollar,ShortTerm(Payday)Loans(Proposed)• ThirdPartyDebtCollection(Proposed)• TRIDAmendments(Proposed)• FirstPartyDebtCollection(Anticipated)• OverdraftProtection(Anticipated)

Whataretheprospectsnextyear?

FutureOpportunitiesØPushCongressFurtheronDataSecurityConcernsØAggressivelyaddressCFPBRegulatoryBurden

ØPotentialmoratoriumonnewregulationsandCFPBStructuralReformsØStructuralchangestotheCFPBØTargetedstatutoryrelief

ØPursueaFederalCreditUnionActupdateØBuildoffworkoftheCharterEnhancementgroupandfeedbackandinputfromallstakeholders

ØLaythegroundwork|BuildSystemSupport|SetExpectations|CreateFavorablePoliticalEnvironment

ØViewthisasathreeyearplan.

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FourPlausibleElectionScenarios

Scenario#1– StatusQuo• ClintonwinsWhiteHouse• GOPRetainSenate• GOPRetainHouse

Scenario#3– DemocraticTrifecta• ClintonwinsWhiteHouse• DemsretakeSenate• DemsretakeHouse

Scenario#2– ConventionalWisdom• ClintonwinsWhiteHouse• DemsRetakeSenate• GOPRetainHouse

Scenario#4– MakeAmericaGreatAgain• TrumpwinsWhiteHouse• GOPRetainSenate• GOPRetainHouse

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Scenario#1– StatusQuo

WhyItWillHappen• ElectorateuncomfortablewithTrumpgivesClintonthekeystotheWhiteHouse,buttasksGOPwithprovidingchecksandbalances.

WhatMeansforCreditUnions• Gridlockensues– andmayworsen.• ContinuedopportunityforpressurefromCongressonCFPB.• Dooropensslightlyforreformsbecauseof2018Senateelections.• Taxreformispossible.

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Scenario#2– ConventionalWisdomWhyItWillHappen• Electorateactsrationallytothechoicesontheballot.• Clintonsolidifiessupportinswingstates.• Demcandidatesmakefewmistakes.• LowerthannormalGOPturnouthurtsincumbentGOPSenators.

WhatitMeansforCreditUnions• Doormayopenabittodiscusscharterenhancements.• IncreasedattentiontocommunityfinancialinstitutionissuesinSenateBankingCommittee.• SlightpossibilitytobeginmovingsomeCFPBreforms.• ContinuedpressurefromCongressontheCFPBexemptionauthority.• Taxreformremainspossiblebutslightlymorecomplicated

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Scenario#2– ConventionalWisdom

SlightpossibilitytobeginmovingsomeCFPBReforms?• Democratswilldefend25seatsin2018,includingfourindeepredstates.• Democratswillhavemoreinfluenceoverpotentialchanges.• ClintonadministrationmayfeellessownershiptothestructureoftheCFPB.

DemocraticSenatorsonBankingCommitteeUpforReelectionin2018• Brown• Donnelly• Heitkamp• Tester• Warren

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Scenario#3– DemocraticTrifectaWhyItWillHappen• AnelectoratescaredtodeathofDonaldTrumpmakesdown-ballotGOPcandidatespayfornominatinghim.• DeeplysuppressedGOPvoterturn-outhurtsotherwisesafeGOPcandidatesinsuburbandistricts.• OpenseatsgotheDemocratsway.

WhatItMeansforCreditUnions• Charterenhancementconversationaccelerates.• Dodd-Franktechnicalchangespossible,butstructuralreformcanalmostcertainlyberuledout.• SteadyregulatorystreamfromCFPB.• Taxreformbecomesslightlyeasier/moreprobable.• PotentialforHouseGOPleadershipshake-up.

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Scenario#4– MakeAmericaGreatAgainWhyItWillHappen• Electorateisfedupwithestablishment,doesnotwantfourmoreyearsofObamaorClinton.• TrumpunitestheGOPandvotersrewardhimwithmajoritiesinbothchambers.

WhatItMeansforCreditUnions• PossibilityofDodd-Frankreformsincreases.• CFPBmoratoriumentersrealmofthepossible.• Hardtoseetherebeingoxygenintheroomforcharterenhancements.• SlowerregulatorystreamafterCordray’s termexpiresin2018.• ButwhoreallyknowswhataTrumpadministrationwouldbelike?

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Lookingaheadto2018

Senate• Demsmustdefend25seats,includingseveralinredstates.• Cordray’s termexpiresin2018;nominationcouldbecampaignissueandcouldspurreform.• SupremeCourtVacanciescouldloomlargein2018.

House• TermlimitsmeananewHouseFinancialServicesCommitteeChairmanwillbeinstalledafterelections.• Partyofthepresidenttendstoloseseatsinfirsttermmid-termelections.

TheBottomLine

• 2016isanelectionyearlikenoneother,butcreditunionsaresetuptowinnomatterwhattheoutcomeoftheelectionis.• The2018electionscouldhavegreaterconsequencesoncreditunionsthanthe2016elections.

Whatdoweneedtodoinordertobewell-positionedin2017andbeyond?

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TwoKeystoImprovingOperatingEnvironmentforCreditUnions

CreditUnionSystemMustContinuetoProjectaStrong,UnifiedVoice:• Whowillspeakforcreditunions?

CreditUnionPerformanceMustRemainStrong:• Membershipgrowth• Loangrowth• Assetquality• Earnings• ServiceExcellence

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BringingitHome• Sign-upforMAP• SubscribetotheAdvocacyUpdate• FollowtheRemovingBarriersBlog• RespondtoCommentCalls• ParticipateinyourLeague’sHike-the-HillProgram

• Inviteelectedofficialstoyourcreditunion

• AttendGAC• Begoodcitizens

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CUNA’sMemberActivationProgram

Ease the Burden• 20+ CUs contacted 600,000 members

• 20,000 messages sent to Capitol Hill

• 85% of those who visited campaign website took action

Overall Reach• 300 credit unions enrolled

• 47 states represented

• Potential reach of more than 13.5 million members CUNA.org/MAP

Imagine a reach of more than 100 million members

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BringingitHome• Sign-upforMAP• SubscribetotheAdvocacyUpdate• FollowtheRemovingBarriersBlog• RespondtoCommentCalls• ParticipateinyourLeague’sHike-the-HillProgram

• Inviteelectedofficialstoyourcreditunion

• AttendGAC• Begoodcitizens

Thank you!

Formoreinformationregardingtheseandotherlegislativeissues,pleasevisittheCUNAwebsite(www.CUNA.org)andclickonLegislativeandRegulatoryAdvocacy.

Ifyouwouldliketofollow-upwithanyquestionsorcomments,[email protected].