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EXAMINING CREDIT UNION 

REGULATORY BURDENS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 10, 2013 

Printed for the use of the Committee on Financial Services 

Serial No. 113–11 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

GARY G. MILLER, California, Vice Chairman 

SPENCER BACHUS, Alabama, Chairman 

Emeritus 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

MICHAEL G. GRIMM, New York 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SHELLEY MOORE CAPITO, West Virginia, Chairman 

SEAN P. DUFFY, Wisconsin, Vice Chairman 

SPENCER BACHUS, Alabama 

GARY G. MILLER, California 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

MARLIN A. STUTZMAN, Indiana 

ROBERT PITTENGER, North Carolina 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

GREGORY W. MEEKS, New York, Ranking 

Member 

CAROLYN B. MALONEY, New York 

MELVIN L. WATT, North Carolina 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

KEITH ELLISON, Minnesota 

NYDIA M. VELA ́ ZQUEZ, New York 

STEPHEN F. LYNCH, Massachusetts 

MICHAEL E. CAPUANO, Massachusetts 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

DENNY HECK, Washington 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

April 10, 2013 ................................................................................................... 1 

Appendix: 

April 10, 2013 ................................................................................................... 31 

WITNESSES 

WEDNESDAY, APRIL 10, 2013 

Burrow, Robert D., President and Chief Executive Officer, Bayer Heritage 

Federal Credit Union, on behalf of the National Association of Federal 

Credit Unions (NAFCU) ...................................................................................... 8 

Reiver, Mitchell, General Counsel, Melrose Credit Union ................................... 11 

Stephens, Pamela, President and Chief Executive Officer, Security One Federal Credit Union, on behalf of the Credit Union National Association 

(CUNA) ................................................................................................................. 9 

APPENDIX 

Prepared statements: 

Burrow, Robert D. ............................................................................................ 32 

Reiver, Mitchell ................................................................................................ 64 

Stephens, Pamela ............................................................................................. 68 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Capito, Hon. Shelley Moore: 

Letter to Financial Services Committee Chairman Jeb Hensarling and 

Ranking Member Maxine Waters from the American Mutual Share 

Insurance Corporation (ASI), dated April 9, 2013 ..................................... 122 

Written statement of the Coalition for Credit Union Access (CCUA) .......... 125 

(1) 

EXAMINING CREDIT UNION 

REGULATORY BURDENS 

Wednesday, April 10, 2013 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:03 p.m., in room 

2128, Rayburn House Office Building, Hon. Shelley Moore Capito 

[chairwoman of the subcommittee] presiding. 

Members present: Representatives Capito, Miller, McHenry, 

Campbell, Pearce, Posey, Fitzpatrick, Luetkemeyer, Duffy, 

Stutzman, Pittenger, Barr, Cotton; Meeks, Maloney, Watt, McCarthy of New York, Scott, Green, Murphy, Delaney, and Heck. 

Ex officio present: Representative Hensarling. 

Also present: Representative Royce. 

Chairwoman CAPITO. Without objection, I am going to call the Financial Institutions and Consumer Credit Subcommittee to order. 

I would like to note that my favorite ranking member, Mrs. 

Maloney from New York, has sustained a disability that requires 

her to stay on the bottom row rather than come up to the top row. 

But I don’t take that as any diminishment of her engagement or 

whether she is paying attention and is knowledgeable of the topics. 

So, hello down there, I say. 

[laughter]. 

Without objection, the Chair is authorized to declare a recess of 

the committee at any time. It seems as though votes are going to 

be occurring at 4 p.m., so I think we will be in good shape. 

This afternoon’s hearing is the first in a series of hearings that 

our Subcommittee on Financial Institutions and Consumer Credit 

will be holding about the regulatory burden for community financial institutions. Today, we are going to focus on the unique challenges that credit unions face in the current regulatory environment. The purpose of these hearings is to gain a better understanding of the regulatory framework for community financial institutions. 

These institutions are critical to the flow of credit in our communities across the Nation. And in particular, I will put a plug in for 

rural America, where I live. Credit union employees know their 

members and are intimately involved in the communities that they 

serve. Rather than relying on purely data-driven decisions, community lenders take a more relationship-based model to lending that 

is integral to the survival of many communities in this country. 

2 

Over the last 2 years, we have heard credit union representatives 

express concern about the growing regulatory burden. 

In fact, one of our witnesses today, Mr. Robert Burrow, from 

Proctor, West Virginia, will quantify the effect regulatory burden is 

having on his credit union. Excuse me, I would like to recognize my 

current ranking member, Mr. Meeks. I mistakenly said Mrs. 

Maloney, because we were together last time. So I am sorry about 

that. I started before you got here. I apologize. 

Mr. Burrow states in his written testimony, ‘‘At Bayer Heritage, 

we have seen our compliance costs double in just the last few 

years, and recently hired a new employee to help with compliance 

at a cost of over $65,000. These increased costs mean that we often 

are slower to offer services that our members want, and there are 

just some services that are non-starters for us, because of the compliance cost.’’ Although these costs may seem trivial to some, they 

have real effects on the ability of credit unions to serve their members. 

The increased cost of compliance can also have a detrimental effect on the ability of credit unions to serve their communities. In 

April of 2008, I was proud to join the representatives of Star USA 

Federal Credit Union in Charleston, West Virginia, for Kids Savings Day. The credit union took a lot of time to educate the children, to help them with learning how to balance a checkbook, what 

it means to save, and what it means to deposit. While it may seem 

trivial in some folks’ mind, we know that financial literacy is a 

huge problem across the country and we need to learn this skill 

early. And this credit union was helping with that. 

This is a program that was started 10 years ago and continues 

today. But it could be just the kind of program that if the compliance costs keep going up and up, will be cut. Recently, Federal financial regulators have expressed concerns about the difficulty in 

quantifying regulatory burden for financial institutions. I understand it is difficult to pinpoint specific rules and regulations that 

are especially burdensome, but it is the cumulative effect of new 

regulations being layered on top of old regulations. 

The purpose of today’s hearing is to take a closer look at these 

issues to determine ways to allow credit unions to operate in a 

modernized regulatory system that gives them the flexibility they 

need to serve the unique needs of their clients. I would like to 

thank our witnesses today for providing the subcommittee with 

thoughtful proposals for regulatory reform. And your testimony will 

help our Members as we begin to work on bipartisan legislation to 

help our community financial institutions operate more efficiently. 

I would now like to yield to my ranking member, Mr. Meeks, for 

the purpose of giving an opening statement. 

Mr. MEEKS. Thank you, Chairwoman Capito. This is a very important hearing that we are holding today. And I want to welcome 

all of the witnesses that we will hear from shortly. But I need to 

give a special shout out, of course, to Melrose Credit Union’s general counsel, Mitch Reiver, for being here, because both he and 

Melrose are from the great 5th Congressional District of New York. 

But today’s hearing, along with next week’s hearing on community 

banks, are probably one of the most important topics that we can 

address. 

3 

Credit unions, along with community banks, are the backbones 

of our communities. Their lending is often countercyclical, meaning 

that when entrepreneurs have difficulty obtaining capital from our 

other lending sources, they can still find it through their local credit unions. Data from 2009 clearly reinforces this notion. The statistics show that while lending by megabanks declined by nearly double digits, credit unions’ lending remained flat, allowing countless 

businesses and consumers to remain afloat and have access to vital 

capital. 

Melrose has been a perfect example of how credit unions can 

benefit a local community. In 2009, and I will use this as an example, my office was contacted by a Queens County nonprofit organization about a problem with a megabank which no longer found 

their account worthy of maintaining. They did everything right, 

they were paying the loan back. But all of a sudden, just arbitrarily, this megabank said they didn’t want to maintain them anymore. And without a line of credit from this institution, the nonprofit may well have folded and, therefore, been unable to provide 

services to several thousand of our constituents. 

Working with Congressman Joe Crowley, we asked Melrose to 

consider a relationship with the organization, which they gladly 

did. And I am happy to report that Melrose and the nonprofit entered into a prosperous relationship as a result of getting together. 

Credit unions have been able to provide critical support without 

the advantages that other institutions maintain. Their access to 

capital is limited and they cannot simply issue more stock or float 

more debt to fund their operations, and yet credit unions must 

compete. 

Some in Congress recognized this, and have pushed for regulatory changes that maintain safety and soundness, but allow these 

local engines of economic growth to remain viable. Examples of this 

include changes to member business lending guidelines, and along 

with my friend, Congressman Ed Royce, I have cosponsored legislation that will allow credit unions to increase member business 

lending. And I look forward to hearing from our witnesses on that 

subject today. 

I want to close by noting that we are at a pivotal point in our 

economic recovery. Economic data continues to be mixed. While on 

the one hand, the stock market is booming and there is a nascent 

housing recovery under way, which are clearly fueling expansion, 

we also face headwinds such as the expiration of the payroll tax 

cut which has undermined growth. I expect there to be several proposals in this subcommittee and committee that will, I hope on a 

bipartisan basis, address reforms that can decisively move the 

economy in the right direction. 

This will require credit unions and community banks to work together. In the past, whenever we have had the opportunity to advance common-sense reforms for one industry, the other gets in the 

way. I hope both groups will put aside their differences so that we 

can unlock the resources that businesses and consumers need to 

fuel the entrepreneurial spirit that defines America. 

Thank you, and I look forward to hearing your testimony. 

Chairwoman CAPITO. Thank you. 

4 

I would like to recognize Mr. Duffy, the vice chair of the subcommittee, for 2 minutes. 

Mr. DUFFY. Thank you, Chairwoman Capito. I am pleased to 

take part in this important hearing which examines the regulatory 

burdens facing our Nation’s credit unions. I appreciate the witnesses coming in today, and I look forward to your testimony and 

the answers to all of our respective questions. 

My home State of Wisconsin has a proud credit union tradition. 

Though I don’t have someone from from my district or even from 

Wisconsin testifying on the panel, CUNA, the national trade association, is based in the great State of Wisconsin. So, we do have 

nice representation. Today, we have 186 credit unions operating in 

Wisconsin. Now, that is impressive but, sadly, it is down from 225 

credit unions a little over 2 years ago. This declining trend in the 

number of credit unions is very concerning. 

It is becoming clear that these institutions are suffering from increased regulations and increased compliance costs, which represent direct threats to their ability to lend and operate. Instead 

of hiring or expanding, these institutions are forced to use their 

members’ money to cover compliance costs. Our Nation’s financial 

arteries flow directly through these small financial institutions and 

credit unions. If we continue to cut off and squeeze these arteries, 

we are certainly not helping families and small businesses in central and northern Wisconsin, or families and small businesses 

around America. 

Many of my colleagues and I continue to highlight differences between small institutions and large institutions, yet we are frustrated and shocked that when rules come out, they are written 

with the one-size-fits-all approach. It is not right that our credit 

unions are being forced to service regulators and not service our 

American families. I look forward to a discussion today on how we 

can stop this consolidation trend and how we can alleviate the burdens from those small financial institutions and those who are responsible for getting dollars out the door to fund Main Street and 

help provide loans to our homeowners and families, not just in central and northern Wisconsin, but across the country as a whole. 

I yield back. 

Chairwoman CAPITO. Thank you. 

I now recognize Mr. Scott for 21⁄2 minutes. 

Mr. SCOTT. Thank you very much, Madam Chairwoman, and welcome. The credit unions play an extraordinary role in our entire 

economy and, certainly, a central role in our financial system. And 

so it is important that we have this hearing. We have a chance to 

look at what your feelings are about the effects of the regulations 

that we are putting in place and have put in place in response to 

the financial crisis that we have gone through. 

And as I said, the credit unions are a major, major player in our 

economy. You have over 7,000 federally-insured credit unions in 

this country, with 92 million members and $961 billion in assets. 

That is a huge part and a very important part of our economy. And 

we have to make sure that the abilities of the credit unions to 

serve our underserved populations across the Nation—this has 

been your core mission. It is very important that we recognize that 

in the regulations we have put forward. 

5 

This has to be at the center so that we do not suffocate credit 

unions’ ability to perform this core mission. And as the country 

continues to recover from this economic crisis, it will be imperative 

that underserved areas have access to affordable financial services. 

The credit unions certainly provide that. Now, there are many individuals who are considered to be unbanked, unserved, and to band 

and help build wealth together. And in credit unions and community banks, financially vulnerable Americans find refuge from being 

preyed upon by loan sharks and predatory lenders. 

So we have to stop this talk about taxing credit unions and move 

on to try to serve the underserved and build wealth together. That 

is our mission. That is what we have to do. Your testimony this 

afternoon will be very, very important in establishing the right pattern and the right direction for this committee to go as we hammer 

out these regulations in response to the financial crisis. 

Thank you. 

Chairwoman CAPITO. Thank you. 

Mr. Miller for 11⁄2 minutes. 

Mr. MILLER. Thank you, Madam Chairwoman. 

Credit unions have done a great job reaching middle-class and 

underbanked families through credit. You serve a different purpose 

than a lot of other financial institutions do. Your earnings return 

to members in the form of lower rates, higher rates on deposits, 

and lower fees. But even though the credit unions were not the 

cause of the crisis we have gone through, you are not immune from 

the regulations that have been placed on everybody else. I believe 

credit unions now have over 5,000 pages of rules from the Consumer Financial Protection Bureau, the CFPB, that you must understand, interpret, and comply with. 

And it is amazing that there are 700 fewer credit unions today 

than there were prior to Dodd-Frank implementation, which was 

not that long ago. But I think we can help in a lot of ways by 

streamlining various regulations credit unions have to face, while 

ensuring the consumer protection-driven intent behind the regulations are maintained. For example, Congress should enable the 

credit unions and prudential regulators at the NCUA to step in 

where appropriate and modify CFPB rules, so long as the modified 

rule still meets the objective of the CFPB. 

I think Congress should consider a risk-based capital system for 

credit unions that more accurately reflects the credit unions’ risk 

that you take. You should require that the CFPB and the NCUA 

look back on the cost-benefit analysis after 3 years to ensure regulations that have a true sense about the cost of compliance of the 

new rule, and make sure they worked appropriately. And I think 

we need to work to modernize the credit unions’ central liquidity 

facility, which we haven’t done. 

And Congress should modernize investment options for credit 

unions to give credit unions more investment options so they can 

better their portfolios that have risk under. I am working on legislation to address these areas and, hopefully, we can enact those 

and make your job a little easier in the future. 

I yield back. Thank you. 

Chairwoman CAPITO. Thank you. 

Mrs. Maloney for 21⁄2 minutes. 

6 

Mrs. MALONEY. Thank you, and thank you, Madam Chairwoman 

and Ranking Member Meeks for calling this important hearing. 

And I appreciate all of the witnesses who are here today. But I 

want to particularly welcome Mr. Reiver, whose credit union serves 

many of the constituents that I am honored to represent. Credit 

unions play an extremely important role in our financial services 

industry. Often, they provide services and products that their members cannot find elsewhere. 

And historically, they have served underserved areas, often areas 

that other financial service institutions have chosen not to serve. 

So they are a very important part of the fabric of financial services 

that we provide in America. And I really am pleased that we are 

taking time today to highlight their work, giving them the opportunity to talk about their challenges and also giving them an opportunity to talk about the regulatory concerns and barriers that 

we face. We all have the goal of getting capital out, resources out 

to good businesses. 

And in the district that I represent, and I would say throughout 

New York and New Jersey, which were devastated by Hurricane 

Sandy, small businesses are having difficulty getting those smaller 

loans and getting those loans below, say, $250,000 and in that 

range, to help them rebuild. So I am working on a bill that is narrowly focused, that would enable credit unions who are lending to 

small businesses affected by natural disasters such as we are suffering in 23 States from Sandy, to keep those loans from counting 

against the cap for a period of time—5 years—so that we get as 

much capital out as quickly as possible to help these small businesses rebuild. 

I know from the credit unions that I work with that they are 

very, very proud of the relationships and bonds that they build 

with the communities which they serve. And I feel that this would 

be a way that would enable them to help in an area where the capital is not really getting there. So I am encouraged about this discussion today and I look forward to your testimony. We don’t want 

anyone to be deprived of a loan because their credit union has hit 

a lending cap and they can no longer loan in that area. I have 

heard that is a problem in New York and New Jersey. 

I thank the ranking member and the chairwoman very much for 

calling this hearing. I look forward to the testimony. 

Chairwoman CAPITO. Thank you. 

Mr. Fitzpatrick for 11⁄2 minutes. 

Mr. FITZPATRICK. Thank you, Madam Chairwoman. Prior to today’s hearing, I reached out to several of the credit unions that 

work in the communities that I serve in southeastern Pennsylvania, around Philadelphia, about the importance of today’s hearing. 

These community financial institutions are providing loans for 

small businesses and for families. They provide important financial 

services for their members. And as in the case of a Ukrainian credit union near my district, they preserve the culture of the community, as well. Credit unions are undeniably important to our economy, so when the Chair announced this hearing, I wanted to reach 

out to them to find out, firsthand from them, how the regulations 

in the marketplace are affecting them individually. 

7 

What I heard, and what I plan to discuss with the witnesses 

today, was that it is, in fact, the case that Federal regulations are 

negatively affecting consumers. I heard particular concern about 

the CFPB and the recent rule regarding Qualified Mortgages. 

There is a lot of anxiety out in our communities about access to affordable credit. I heard that the cost of compliance is growing, and 

that those costs are now being passed on to consumers. So I look 

forward to following up on some of these concerns during the questions and working with the Chair on some possible regulatory relief 

legislation that may result from these hearings. 

So I appreciate the hearing today, and I yield back. 

Chairwoman CAPITO. Thank you. Mr. Delaney for 11⁄2 minutes. 

Mr. DELANEY. Thank you. I, like my colleagues, share in the admiration of credit unions and the important role they play in the 

community, the important role they play for their unique stakeholders and their members, and the important role they play in our 

economy. 

I am supportive of efforts to allow additional capital, or supplemental capital, to flow into credit unions so that they can continue 

to grow and manage their business in a safe and sound manner. 

And I also—like many of my colleagues—am supportive of efforts 

to streamline the regulatory approach to credit unions to reflect 

their business plan, which is unique and is focused on their communities, so that they can effectively and efficiently pursue their 

mission, which is incredibly important to our economy and incredibly important to their communities. 

But I am mindful, as we think about expanding the mandate of 

credit unions beyond the traditional mandate—tradition—particularly around business lending, that we are mindful of the role that 

community banks play in our country, as well. Because community 

banks fulfill, often times, the same mission as it relates to business 

lending. And they do it in a taxable framework, which adds cost 

to their business. It is important for me, as I hear about the efforts 

of community credit unions to expand their mandates, to think 

about it in the context of competitiveness with community banks. 

Because we wouldn’t want to do something that would hurt community banks’ ability to serve their mission, as well, by putting 

them at a significant competitive disadvantage in community business lending. 

Thank you. I yield back. 

Chairwoman CAPITO. Thank you. 

I think that concludes our opening statements. So, I want to welcome our panel of distinguished witnesses. I will introduce everybody, and then I will recognize Mr. Burrow at the beginning. Mr. 

Burrow is a fellow West Virginian whose business is located in 

West Virginia. Mr. Robert G. Burrow, president and chief executive 

officer of Bayer Heritage Federal Credit Union on behalf of the National Association of Federal Credit Unions. I will introduce our 

next witness before she begins to speak. 

I now recognize Mr. Burrow for 5 minutes. 

8 

STATEMENT OF ROBERT D. BURROW, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, BAYER HERITAGE FEDERAL CREDIT 

UNION, ON BEHALF OF THE NATIONAL ASSOCIATION OF 

FEDERAL CREDIT UNIONS (NAFCU) 

Mr. BURROW. Good afternoon, Chairwoman Capito, Ranking 

Member Meeks, and members of the subcommittee. My name is 

Robert Burrow, and I am testifying this afternoon on behalf of 

NAFCU. I serve as the president and CEO of Bayer Heritage Federal Credit Union in Proctor, West Virginia. Bayer Heritage has 

more than 29,000 members, with assets totaling about $300 million. NAFCU and the entire credit union community appreciate the 

opportunity to discuss much-needed regulatory relief for credit 

unions. Finding ways to cut down on burdensome and unnecessary 

regulatory compliance costs is a chief priority of NAFCU and its 

members. 

A 2011 NAFCU survey found that nearly 97 percent of respondents were spending more time on regulatory compliance issues 

than they did in 2009. A 2012 NAFCU survey found that 94 percent of respondents had seen their compliance burdens increase 

since the passage of Dodd-Frank in 2010. At Bayer Heritage, we 

have seen our compliance costs double in just the last few years, 

and recently hired a new employee to help with compliance. These 

increased costs mean that we are often slower to offer services that 

our members want, and there are some services that are non-starters for us because of the compliance costs. 

The ever-growing regulatory burden on credit unions stems not 

just from one single onerous regulation, but from a compounding 

of regulations stemming from a number of Federal regulators. A 

number of these regulations may be worthwhile and well-intentioned, but they are often issued with little coordination between 

regulators and without removal of outdated unnecessary regulations. In June 2012, NAFCU wrote to the Financial Stability Oversight Council to urge it to focus on its duty to facilitate regulatory 

coordination under the Dodd-Frank Act. We hope the committee 

will continue to encourage the NCUA, the CFPB and the FSOC in 

this regard. 

NAFCU has prepared a five-point plan on where credit unions 

need relief and assistance. The five areas covered in this plan include: One, administrative improvements for the powers of the 

NCUA. This includes provisions such as the ability to grant parity 

to a Federal credit union on a State law, allowing the NCUA to 

delay or modify implementation of a CFPB rule to tailor it to the 

unique nature of credit unions, and requiring the NCUA and the 

CFPB to do a look-back, cost-benefit analysis of all new rules. 

Two, capital reforms for credit unions, such as establishing a 

risk-based capital system for credit unions or allowing the NCUA 

to grant credit unions access to supplemental capital as proposed 

in H.R. 719. 

Three, structural improvements for credit unions, such as updating a number of outdated governance and a few of the membership 

restrictions that are in the Federal Credit Union Act. 

Four, operational improvements for credit unions. This includes 

modifying the arbitrary credit union member business lending cap, 

9 

as proposed in H.R. 688, or in other ways outlined in my written 

testimony. 

Other improvements sought in this area include allowing credit 

unions greater flexibility to manage their investments and greater 

flexibility in their loan maturities. Furthermore, credit unions 

should be given parity with FDIC-insured institutions when it 

comes to interest on lawyers’ trust accounts. 

Five, establishing 21st Century data security standards for the 

safekeeping of financial and card data by those entities not covered 

by the Gramm-Leach-Bliley Act. My written testimony covers these 

and other areas where Congress should act to provide relief for 

credit unions. 

We hope that the committee will act on these issues. In conclusion, it is not one single regulation that is creating this ever-increasing burden, rather the tidal wave of new rules and regulations 

such as the new mortgage rules, often coming from multiple regulators with little or no coordination between them. NAFCU expressed concerns about the potential of this happening during the 

debate on Wall Street reform, and this was a reason we did not 

support credit unions being subject to the rulemaking of the CFPB. 

This regulatory burden is compounded and outdated. Regulations 

are not being removed or modernized at the same pace. NAFCU 

could support a credit union regulatory relief package being combined with regulatory relief for community banks. It is important, 

however, that such a joint effort be balanced between the top needs 

of both the credit union and the banking industry. We look forward 

to working with the committee in this regard. 

Thank you for your time and for the opportunity to testify before 

you here today, and I welcome any questions you may have. 

[The prepared statement of Mr. Burrow can be found on page 32 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Ms. Pamela Stevens, president and chief executive officer, Security One Federal Credit Union, on behalf of the 

Credit Union National Association. Welcome. 

STATEMENT OF PAMELA STEPHENS, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, SECURITY ONE FEDERAL CREDIT 

UNION, ON BEHALF OF THE CREDIT UNION NATIONAL ASSOCIATION (CUNA) 

Ms. STEVENS. Thank you, Chairwoman Capito, and Ranking 

Member Meeks. My name is Pamela Stevens and I am president 

and CEO of Security One Federal Credit Union in Arlington, 

Texas, here today on behalf of the Credit Union National Association. We do appreciate the opportunity to testify on this topic: everincreasing, rarely decreasing regulatory burden. We look forward to 

working with you for relief, as well. 

We do appreciate the bipartisan legislation that Congress passed 

last year on ATM signage and the bill recently passed on privacy 

notifications, both of which were sponsored by Representative 

Luetkemeyer. These bills are a step in the right direction, and they 

offer a road map for future legislation. My written testimony describes regulatory burdens that credit unions face. It also lists 

steps the CFPB and the NCUA have taken to reduce regulatory 

10 

burden, and highlights ongoing concerns with these agencies and 

FASB, as well. It also makes recommendations for statutory 

changes to enhance service to credit union members. 

Since 2008, credit unions have been subjected to 157 rule 

changes from over 15 agencies, most of which were written before 

the CFPB issued its rule. That is almost one a week. So regulatory 

burden isn’t new. It is not a new problem for us, but it is getting 

worse. We are overwhelmed by the impact of these rules because 

we know that we didn’t cause the financial crisis and we know we 

don’t abuse our members. Yet, we are being forced to pay the price 

and comply with the very same rules designed for those who did 

cause the crisis. 

Congress authorized the CFPB to exempt credit unions from 

some rules, and we wonder why it isn’t fully utilizing this authority. We believe more attention should be directed toward the abusers, and we call on the subcommittee to ensure the CFPB 

proactively uses its exemption authority. My written testimony includes 35 recommendations aimed at reducing regulatory burden. 

Because of these lights right here, though, I can’t go into all of 

them. So I will highlight a few for you. 

Credit unions need Congress to permit them to accept supplemental forms of capital consistent with their cooperative principles. 

We also urge Congress to increase member business lending caps. 

Both of these issues deserve the attention of this subcommittee as 

soon as possible. And there are things Congress can do immediately, as well. We ask you to consider legislation that would 

change the treatment of non-owner-occupied, one-to-four-family 

dwelling loans. Currently, if a credit union makes such a loan, it 

is treated as a business loan. If a bank makes the same loan, it 

is a residential loan. 

This disparity should be fixed. Congress should enact legislation 

that fully exempts government-guaranteed loans from the MBL 

cap, not just the guaranteed portion. We have a number of recommendations, such as clarifying share insurance coverage for 

pass-through accounts, and increasing the maturity limit for higher 

education loans. We also propose modernizing the NCUA board by: 

expanding that board from three to five; allowing more than one 

member to have credit union experience; and reserving one seat on 

the board for a State credit union supervisor. 

We ask Congress to codify the CFPB’s Credit Union Advisory 

Council. This is an important tool for the Bureau to receive feedback and input from credit unions. CFPB voluntarily formed this 

group and we want to make sure it continues. In addition, we urge 

Congress to address Regulation D. Today, there is a cap of six 

transfers per month a customer can make from a savings to a 

checking account. When my members ask me why this is, frankly, 

no matter how many times I explain it no one seems to understand. Further, eliminating the cap would save money for consumers in overdraft fees. 

Finally, we look forward to the reintroduction of the Examination 

Fairness bill that Chairwoman Capito and Representative Maloney 

introduced last year. Credit unions deserve to know the legal authority that examiners are relying on. We need independent ombudsmen to hear our concerns about the process, and an indeVerDate Nov 24 2008 16:42 Jun 21, 2013 Jkt 080877 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\80877.TXT TERRI
11 

pendent appeals process to resolve disputes Our proposals do not 

exhaust all the actions that Congress should consider, but they do 

represent an important first step. 

We urge you to adopt these proposals, and we look forward to 

working with you on these issues. Thank you for the opportunity 

to testify. 

[The prepared statement of Ms. Stephens can be found on page 

68 of the appendix.] 

Chairwoman CAPITO. Our third witness is Mr. Mitchell Reiver, 

general counsel, Melrose Credit Union. Welcome. 

STATEMENT OF MITCHELL REIVER, GENERAL COUNSEL, 

MELROSE CREDIT UNION 

Mr. REIVER. Thank you. Chairwoman Capito, Ranking Member 

Meeks, and members of the subcommittee, thank you for your invitation to testify in front of the subcommittee today regarding regulatory burdens on credit unions. My name is Mitchell Reiver, and 

for the past 24 years, I have served as general counsel and compliance officer for Melrose Credit Union in Queens County, New York. 

It is my general assessment that the increasing regulatory burden on credit unions is both misguided and misplaced. Although I 

certainly recognize the need for appropriate regulation, too often 

credit unions end up paying the price for abusive practices perpetrated by non-credit-union entities. We continue to endure this 

reality every day, as the CFPB conducts its rulemaking process 

with the intent of preventing another financial meltdown, but also 

with the result of burdensome regulations being issued on institutions that did not play a role in causing the crisis. 

A seemingly unending rulemaking process stemming from the 

CFPB, coupled with outdated and duplicative regulations already 

in statute, results in credit unions spending more resources on 

compliance and less on other services that actually benefit our 

members. Today, I would like to briefly touch on several topics I 

believe highlight examples where common-sense regulatory relief is 

needed. On the issue of the annual privacy notices, I would like to 

thank Representatives Luetkemeyer and Sherman for their work 

on H.R. 749, the Eliminate Privacy Notice Confusion Act 

Streamlining annual privacy notices by requiring them to be sent 

to consumers only when a policy changes illustrates the general 

premise that consumers can often benefit more from less. Like all 

Americans, I, too, am concerned about the safety and security of 

our country. While the Bank Secrecy Act is a valuable tool, I have 

concerns about the effectiveness of its goals relative to the cost and 

compliance burdens on credit unions and other small institutions. 

Tens of thousands of currency transaction reports and suspicious 

activity reports are filed by financial institutions. 

Identifying and fixing inefficiencies in these reports can help to 

reduce these costs. For example, it would helpful to understand 

more about how the government and law enforcement are using reports, as well as what types of reports are useful and which are 

not. BSA compliance disproportionately burdens smaller financial 

institutions, including approximately 3,000 credit unions that have 

5 or fewer employees, but must comply with BSA compliance. I fear 

12 

the credit unions will spend significant time and cost if the proposed customer due diligence proposal is finalized. 

The proposal requires expanded due diligence regardless of risk. 

It should be the other way around. More focus should be placed on 

strengthening rules that apply to other types of institutions that 

are not subject to these strict requirements. Examination fairness 

is another area of concern for all credit unions. Melrose is a New 

York State-chartered credit union, supervised by our State Department of Financial Services. 

The NCUA examples the credit union in its role as the insurer 

of our shares. It has long been the case that our primary regulatory 

is superseded by the NCUA during what are typically joint exams. 

It does appear that the quality and competence of the NCUA examiners has improved over the years. However, as a State-chartered 

credit union, if the system of dual chartering is to mean anything, 

the NCUA should defer to our State regulator and not the other 

way around. 

On the issue of examinations, I would like to thank Chairwoman 

Capito and Representative Maloney for their hard work on examination fairness legislation. Establishing a process for credit unions 

to share their examination experiences without fear of retaliation 

is extremely important, as well as giving credit unions an opportunity to appeal an examination decision through an independent 

process. 

Credit unions are also now faced with virtually impossible new 

requirements for conducting international remittances. The CFPB’s 

new disclosure requirements for remittances will clearly create a 

burden on our operations both in cost and compliance. These new 

rules would require credit unions to disclose real-time foreign taxes 

and fees imposed by financial institutions overseas, information 

that may not always be readily available or guaranteed at the time 

of the initial transaction. These rules will most certainly cause 

many, if not all, smaller credit unions which offer remittances to 

end those services. 

Remittances are an essential service required in areas across the 

country with large numbers of foreign-born citizens and temporary 

and permanent residents. They provide a vital monetary lifeline between an individual residing here and his or her family in another 

country. Although the CFPB did revise its exemption threshold 

from 25 remittances per year to 100, this threshold is still much 

too low to offer any measurable relief for participating credit 

unions. Instead of credit unions being required to provide information on taxes and fees that are subject to change without their 

knowledge, they should instead be given the flexibility to provide 

disclosure of the highest possible fees and maximum possible taxes 

the member might incur. 

Credit unions strive to provide only the best services to their 

members. The more time and resources we spend on complying 

with the conveyor belt of new and existing rules, the less time we 

can spend on providing quality services to our members. 

Chairwoman Capito, Ranking Member Meeks, I would like to 

again thank you for inviting me here today and affording me the 

opportunity to testify. I am happy to answer any questions you 

may have. 

13 

[The prepared statement of Mr. Reiver can be found on page 64 

of the appendix.] 

Chairwoman CAPITO. Thank you all. That concludes our testimony, and begins the questioning phase. I will begin, and I will 

yield myself 5 minutes for questioning. 

Very quickly, do all three of your credit unions write mortgages? 

Mr. Burrow? 

Mr. BURROW. Yes, we do. 

Chairwoman CAPITO. Ms. Stevens? No. Mr. Reiver, yes. 

Mr. REIVER. Yes, ma’am. 

Chairwoman CAPITO. Okay. So to the two gentleman, with the 

QM rule that has just been put out by the CFPB, have you had 

a chance to digest what effect this will have on your ability to write 

mortgages, and what do you see down the road in that area? Mr. 

Burrow? 

Mr. BURROW. Okay. Yes, we have given that some thought. Right 

now, probably most of our mortgages would, in fact, be within the 

purview of that regulation. However, in some cases, where in our 

rural areas I have the occasion where there are a lot of folks who— 

I will just stick to debt ratio requirement, for example. They may 

not be able to comply in that particular area. Their debt ratio may 

be over the 43 percent, but yet they have had long-standing credit 

with the credit union, and they have been in the same employment 

for quite some time. 

They are actually what I could consider a gold-plated loan, but 

because of this, it would fall outside the QM. Unless that is addressed, I would—personally, I would be making exceptions and 

probably getting written up for them because— 

Chairwoman CAPITO. So you would continue to try to write— 

probably— 

Mr. BURROW. I would continue going—and probably my examiner— 

Chairwoman CAPITO. At your own peril. 

Mr. BURROW. Yes, because— 

Chairwoman CAPITO. And it is interesting to note, too, that particular customer is not going to fall within the Qualified Mortgage 

definition in any financial institution. 

Mr. BURROW. Right. But in my opinion, because it is a good loan, 

it is a good asset for the credit union. 

Chairwoman CAPITO. Right. 

Mr. BURROW. But because of a regulation, I am not going to let 

it walk away. 

Chairwoman CAPITO. Okay. 

Mr. Reiver? 

Mr. REIVER. Yes. At Melrose, we portfolio all of our loans. So we 

are the ones who are taking the risk, and we are certainly the ones 

who are in the best position to assess that risk. It seems that the 

QM changes are designed to prevent loans being granted to people 

who, at some point down the line, might not be able to repay them, 

and to give them some type of protection, come the foreclosure 

process. Credit unions were never making those kinds of loans, and 

were never really involved in that problem to begin with. 

To place that burden on credit unions, in essence, to take the underwriting out of the hands of the experts and put it in the hands 

14 

of regulators, when you have credit unions which had done this 

successfully for years and years and years, it doesn’t seem to make 

a lot of sense. And if anything, will impact the ability of the credit 

unions to make these loans to their members. 

Chairwoman CAPITO. Okay. Thank you for that. 

Another question, we had a session with the regulators, talking 

about they quantify the cost of regulations. And the basic message 

there was it is difficult to quantify. And it is difficult to quantify, 

I think Mr. Burrow said in his statement, because it is not just one 

single regulation; it is the accumulation of a lot of different regulations that burden down an institution. How can you help us help 

them to be able to quantify this? 

Because I think it is important not only in terms of your business model, but access to credit for your particular constituency. 

And it also eliminates your flexibility. So if you were sitting in our 

seat, to say to them—and we keep asking, quantify the regulatory 

burden here, and they are sort of, well, we can’t really quite get 

there. What would be some of the ways you might suggest? We will 

start with Ms. Stevens just because she is in the middle. 

Ms. STEVENS. Thank you for that question. Part of the issue is, 

small institutions have the same burden as a billion-dollar institution. And really, credit unions are all small institutions. But we 

start adding up things like staff time, the expense to train, the expense to reproduce forms, disclosures. 

At Security One, we don’t have any one person who is dedicated 

to that. We are too small to hire someone to handle compliance, so 

my vice presidents and I do that work. We do the research. I am 

the one who sits up at night reading regulations and trying to understand them. I think the answer is, Security One maybe doesn’t 

need to be regulated along the same lines as a Bank of America, 

for instance. I can’t envision their president sitting up at night 

reading the regulations. So something that fits. Not a one-size-fitsall— 

Chairwoman CAPITO. Right. 

Ms. STEVENS. —but an appropriate type of regulation. 

Chairwoman CAPITO. Okay. Thank you. My time has expired. I 

would say, too, what you are asking basically is to keep the exemptive powers available to these regulators to be able to look at that. 

But you have also mentioned some things like cost of training, cost 

of hiring, time costs that you are diverting from loaning or whatever else you might be doing— 

Ms. STEVENS. Right. 

Chairwoman CAPITO. —in your normal business day. 

Mr. Meeks? 

Mr. MEEKS. Thank you. Let me ask a few questions. Because 

small businesses I know in New York, some, I think, that is why 

Mrs. Maloney’s bill that she has talked about is really good. Small 

businesses, getting them back where they are tremendously important because they create jobs. And so with the fact that small businesses now are in more need of reliable sources of capital, if the 

credit union member business lending cap was increased, do you 

think that would have an impact on job creation? 

Because we are talking about creating jobs, and I want to get 

people back to work who were victimized by Sandy. So by increasVerDate Nov 24 2008 16:42 Jun 21, 2013 Jkt 080877 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\80877.TXT TERRI
15 

ing it, do you think it would have an impact on job creation, Mr. 

Burrow? 

Mr. BURROW. Absolutely. I really believe that if the cap is increased, there is going to be a lot more motivation. For example, 

in our credit union, right now, we have a long way to go before we 

hit the cap. But we are very interested in investing more money 

in our member business lending. And that means hiring a qualified 

loan officer, spending a lot of money for software, and so forth. And 

today, we might be well below it, but if we do the job right, it won’t 

be long before we hit that cap. 

So I have to think about the long-term investment. If I am going 

to bump into that ceiling fairly quickly, it is going to make me step 

back and think, should I do that or not. And if we have the ability 

to get that money out into the hands of the community—I am turning away folks right now who would like to have somewhere between $50,000 and $200,000 and we are not equipped to do it. And 

in our neck of the woods, the chairman knows very well that employment opportunities are rare. 

But the small businessman and woman are key drivers of that. 

And if we can help do that, it is certainly going to spike it. 

Mr. MEEKS. Ms. Stevens, in your testimony, you proposed raising 

the de minimis amount of credit union small business loans to 

$500,000 and instructing that amount for inflation. The current de 

minimis level is—I think it is $50,000, and the average credit 

union business loan, if I am not mistaken is $219,000. Can you tell 

us why are you proposing such a significant increase? 

Ms. STEVENS. This limit has not been looked at in a number of 

years. And $200,000 being an average does not allow enough room, 

perhaps in the future, for some institutions to make larger loans. 

There are credit unions who have done business lending since the 

day they opened their doors. I have a friend in Houston, the Milk 

Producers Credit Union. That is their basic line of business. And 

business lending doesn’t have anything to do with taxation, as 

someone suggested earlier. 

We know that we could contribute roughly $14 billion to the 

economy. And CUNA estimates we could create 140,000 jobs, I believe is the latest number. 

Mr. MEEKS. So let me also then ask, Ms. Stevens, in your testimony you also recommended exempting government-guaranteed 

loans from the MBL cap. And right now, only the guaranteed portion of the loan is exempt. Do you believe by exempting the entire 

portion of the loan, we will encourage greater credit union participation in SBA programs? 

Ms. STEVENS. Absolutely. And if I may add to that, we don’t currently offer business loans. And the reason is because our cap 

would be $6.5 million, and it doesn’t make sense for Security One 

to go out and hire the expertise to put such a small amount of 

loans on the books that you might have to turn away in the future. 

Mr. MEEKS. So let me ask, and Mr. Reiver, you can answer this 

or any one of you. Because as you heard Mr. Delaney say, and I 

said it even in my remarks, we are looking forward to trying to 

have community banks and credit unions work together, et cetera. 

And in recent months, we have had success here in passing an 

ATM fee disclosure bill and a privacy notification bill out of the 

16 

House, with the cooperation and support of both credit unions and 

community banks. 

And I was wondering, are there other types of regulatory relief 

measures that maybe your could get together with community 

banks on so that there can be something—so there is a voice of 

both segments that I think are very important to our communities. 

Is there something else you think that—and I am going to ask the 

same question of them when we have their hearing next week— 

where there are opportunities to work together? 

Mr. BURROW. If we are still—if you want to still continue to talk 

about business lending, as far as I am concerned and our credit 

union is concerned we just want our members to have options. And 

if they can also have options with the community banks that would 

benefit them, that is great. In my opinion, it doesn’t have to be an 

either/or type of thing. And if it works to the benefit of the community banks getting money into the hands of their community customers, who happen to also be our members, that is fine. 

I think we can coexist that way. It is going to be—we are all 

going to win. 

Mr. MEEKS. I am out of time. 

Chairwoman CAPITO. We have been called for votes. I am going 

to call on Mr. Duffy to do 5 minutes of questions, then I am going 

to put the committee in recess. And we will reconvene in an hour. 

We have a lengthy series of votes. 

So, Mr. Duffy, 5 minutes? 

Mr. DUFFY. Wonderful. We have kind of been plugging different 

bills that have come up, so I will plug my own. I introduced a bill 

last cycle that dealt with the standard of review for CFPB bills, 

when they go to FSOC, giving our credit unions and small banks 

a louder and bigger voice to have those rules reviewed. You all supported that, and we are going to hopefully get some support behind 

that bill again. So, that is my shameless plug. 

I know you all agree that our credit unions are burdened by regulation, right? But can you come to us today and say, listen, yes 

there is new burdensome regulation, but our institutions are far 

safer and sounder because of this new burdensome regulation? Is 

that the case? 

Mr. BURROW. I can’t honestly say yes to that. I don’t— 

Mr. DUFFY. You are safer, or you are not safer? 

Mr. BURROW. I can’t say that I am any safer. 

Mr. DUFFY. Okay. But that aside, are your families and your 

small businesses treated in a much fairer way now that you have 

these new rules and regulations and hoops to jump through? 

Mr. BURROW. That— 

Mr. DUFFY. No? 

Mr. BURROW. Go ahead. 

Mr. DUFFY. You were treating them fair from the start, right? 

Mr. BURROW. We were fair before, I guess was my point. 

Mr. DUFFY. Right. 

Mr. REIVER. We are credit unions. That has never been an issue. 

Ms. STEVENS. I might say that they are treated less fairly because we are spending more time on regulations than we are helping them. 

Mr. BURROW. Good point. 

17 

Mr. DUFFY. Sure. 

Ms. STEVENS. And working with them directly. Resources are diverted, that sort of thing. 

Mr. DUFFY. I think that is an important point, that we really 

have to focus on new rules and regulations which haven’t made you 

any safer, any sounder, and haven’t helped the clients and the families and the small businesses which you serve. It has actually 

made it more difficult for you to serve them. 

I mentioned in my opening statement that I was concerned about 

consolidation. I see that in Wisconsin, but I don’t know if you have 

seen that around the country. Do you see that coming? If you are 

seeing that, do you see it coming from the new regulatory burden, 

or is something else happening that is causing this consolidation, 

Mr. Burrow? 

Mr. BURROW. I have an example I think might fit what you are 

talking about. About a year or so ago, the National Credit Union 

Administration came to us and said that there was a very small 

credit union in Glendale, Reynolds Memorial Hospital. The chairman is very familiar with that credit union, I am sure. And they 

were not in financial trouble. They had good capital, they did everything right, playing by the rules. But you are talking about a 

staff of one, maybe one-and-a-half. 

And they basically said, we can’t keep up anymore. We can’t do 

it anymore. We have to find a merge partner. And so NCUA came 

to us and asked if we would be willing to do that. Geographically, 

it worked out very well for us. But they didn’t quit being the credit 

union because they—it wanted to or they weren’t doing a good job. 

They just couldn’t keep up anymore. And so to me there is an example of one less credit union out there simply because of the regulatory environment we are in. The one-size-fits-all doesn’t work. 

Ms. STEVENS. If I may add, my colleague referred to it as a conveyor regulatory burden. I think of it more as a treadmill. I am 

constantly running trying to keep up. And I live in fear that perhaps we are not in compliance because there are not enough of us 

to handle that. 

Mr. DUFFY. And I think in my district, the average is 10 employees. We are small, and that one person can even specialize in the 

compliance part. 

Mr. REIVER. At our credit union, we have 50 employees. And I 

would say that every one of them spends at least a portion of their 

work day complying. It is a tremendous, tremendous burden. And 

the members, by and large, are not deriving a lot of benefit from 

it. 

Mr. DUFFY. If I can just ask one question, I only have a minute 

left. If you could pull a bit of fairy dust, bipartisan fairy dust, out 

of your pocket, and get people to work together in Congress—House 

and Senate—I know you have all indicated several things that you 

would like to have happen, you have given us a list. It is hard to 

get people to agree to move anything. But if you were to give us 

one message to go—if you guys could do one thing, move this one 

bill, it would give us the greatest mileage. And I know you have 

said this, and it is a pile-on effect, it is all the different rules. 

It is hard to identify one. But you are not going to see—and I 

hope you would see a lot of bipartisanship, but if you could say, 

18 

hey, get this done for us, get this one thing. This is the greatest 

mileage we would get. If you guys would all give me one thing that 

could happen— 

Ms. STEVENS. I am ready. 

Mr. DUFFY. Oh, go. I can tell you are ready. 

Ms. STEVENS. Supplemental capital would be very, very helpful 

for us. We have one way to raise capital, and that is the retained 

earnings. In a month’s time, a big change can happen in an institution. For instance, our General Motors employees received profitsharing checks to the tune of about $7,000 last month. Our assets 

rose $2 million, and we dropped almost 70 basis points in net 

worth. 

We have no way to raise supplemental capital, and NCUA is not 

very—they don’t have a lot of—they are—there is no flexibility 

with PCA requirements. 

Mr. DUFFY. And I am over time, but can I just get a quick answer from everyone before we go? 

Chairwoman CAPITO. Yes. 

Mr. DUFFY. Mr. Burrow? 

Mr. BURROW. Exempt credit unions from CFPB regs. 

Mr. DUFFY. Good. 

Mr. REIVER. Sure, I agree with that. 

Mr. DUFFY. Okay. I yield back. Thank you. 

Chairwoman CAPITO. Thank you. 

With that, the committee will stand in recess. I apologize for 

this, but it is the hazards of Capitol Hill. We will return, the intention is, at 3:45. 

Yes? 

Mrs. MALONEY. It is so hard to move around. Can I continue 

questioning them, or not? 

Chairwoman CAPITO. We only have—what? 

Mrs. MALONEY. Three minutes left? 

Chairwoman CAPITO. Three minutes left to go. 

[recess]. 

Chairwoman CAPITO. Let me—okay. I am going to call the committee back into order, and I am going to yield to Mr. Scott 5 minutes for questioning. Thank you, and thank you for your patience. 

I apologize. But I wasn’t too far off about when I thought we would 

be finished. 

Mr. SCOTT. Thank you very much, Madam Chairwoman. 

As I said in my opening statement, credit unions are a very important part of our financial structure and so are community 

banks. And so I think it is important for us to try to find areas 

where the two can work together. And let us use as our point of 

reference here two bills, and let me get your reaction to one bill 

which is H.R. 719. Are you familiar with that? 

Are you all familiar with that one, H.R. 719? As I understand it, 

H.R. 719 would shift the credit unions’ reliance on retained earnings and would allow capital from outside investors to be included 

in the regulatory net worth requirements, correct? So let me ask 

you whether H.R. 719 would make credit unions beholden to outside investors without ceding your tax subsidy as a communitybased nonprofit institution? 

19 

Ms. STEVENS. Could you repeat that last part of the question, 

please? 

Mr. SCOTT. Would this bill, H.R. 719, which would shift the credit unions’, your reliance, on retained earnings, and would allow 

capital from outside investors to be included in your regulatory net 

worth requirement, would—whether or not that would make credit 

unions beholden to outside investors without ceding your tax subsidy as a community-based institution? 

Ms. STEVENS. Yes, we definitely support supplemental capital 

within the correct framework that would allow us to maintain our 

cooperative structure. We envision this as being something perhaps 

members would supply. But we don’t believe it changes our structure in terms of our tax status, either. 

Mr. SCOTT. What I am getting at here is, credit unions feel that 

in some measure you all threaten them. That it is a competitive 

situation here. And so what I want to give an opportunity for you 

to respond to is just simply to answer: Where is this threat? Will 

that be a threat? And that segues into the other question I wanted 

to ask relative to House Resolution 688. Which, really, these two 

issues are the meat of the matter. 

Because you all have a tax exemption. You have a charter. You 

have certain situations for your benefit that the community banks 

don’t. They see that as maybe some sort of competitive edge. And 

so that is what this question was for, to use that tax policy. And 

then on H.R. 688, you want to raise your member business cap for 

loans for small businesses from 12.25 percent to 27 percent of assets. Do you see this as giving you some competitive edge over community banks? 

We are faced with that. Now, personally, I love credit unions and 

I love the banks. And many of us on this committee feel the same 

way. We have to juggle this love affair and try to treat everybody 

fairly. So I wanted to respond to that. And if you could, explain to 

me why you would move from 12.25 percent to 27.5 percent, which 

is a 100 percent increase. So if you could just— 

Mr. BURROW. I would like to respond to that, if I could. First of 

all, if I could go back to your original question about supplemental 

capital. I believe that just gives the NCUA the ability to allow credit unions, with some parameters, the access. It doesn’t automatically give them supplemental capital, it just gives them the ability, 

in good times and bad. And we went through the bad times. And 

the only way we can build capital is basically through retained 

earnings, basically the spread between what we earn and what we 

pay. 

And that is the only way we can get capital. It just gives credit 

unions the ability to have another outlet. And to say that we are 

beholden to the investor, well, if the investor wants to invest in the 

credit union if it is a poor investment by investing in the capital— 

their capital in the credit union, the investor will be the one who 

will be paying the price for that. 

Mr. SCOTT. And—very quickly, if I may, Madam Chairwoman. 

Could you give me a response to this differential? You are at 12.23 

percent of your asset, and you want to go to 27 percent. 

Mr. BURROW. Yes. 

20 

Mr. SCOTT. I am sure you didn’t just pluck that out of the air. 

There has to be some rationale. And if you would move down that 

road in any way, would 18 points or 20, somewhere in the middle, 

be helpful? 

Ms. STEVENS. If I could give a little bit of history on that, there 

didn’t used to be any limit. Currently, credit unions represent 

roughly 5 percent of the small business loans in the community 

area. And even if we were to all exhaust all of our limits, we would 

still only, in that small community field across the country, account 

for 10 percent of the business. So it is not like we are taking a 

great deal of business away. 

We don’t have a fight with our community banking brethren. In 

fact, I think we have a lot in common. There are a number of regulations—Reg D, some of these other things we are looking at— 

exam fairness, the way FASB accounts for loan losses that we can 

agree on. There is room for agreement on some things. But some 

of the things we want don’t impact them at all, either. 

Mr. SCOTT. Thank you for your generosity, Madam Chairwoman. 

Chairwoman CAPITO. Certainly. 

Mr. Miller for 5 minutes. 

Mr. MILLER. Thank you, Madam Chairwoman. I really enjoyed 

the testimony today. But as I see it, credit unions kind of serve a 

different purpose, to some degree, have a different clientele and 

have different structures than banks in many fashions. So the 

problem I am having is, I look at the CFPB and the regulations 

that are being imposed, and I recognize the consumer-driven intent 

behind the CFPB regulations. But I guess, for Mr. Burrow, I have 

a question. Do you think the regulations coming out of the CFPB 

have been written in such a way that they fit credit unions, number one? 

Mr. BURROW. No, sir, I don’t. The reason is that any time you 

try to have one-size-fits-all—and I know it is well-intentioned and 

everyone was trying to do the right thing—but when you do something in haste and it is sort of one-size-fits-all, it never really 

works. And as a credit union, we look at ourselves as being Main 

Street. We are not Wall Street, but yet because of some of the 

things that Wall Street did, we are still paying the price on Main 

Street. So to answer your question, absolutely not. 

Mr. MILLER. And further acceding to this coordination between 

the NCUA and the CFPB, as it—to ensure credit unions can comply with rural requirements? 

Mr. BURROW. My impression is, there really probably isn’t much 

coordination there. And I am just speaking as one credit union, and 

my interaction is solely with my NCUA examiners. But I find them 

often times to be just as confused about what their role is, and the 

regs and what they can do, as maybe we are. So I would guess 

from that there is not a whole lot of coordination between the two. 

Mr. MILLER. Now, your risk-based capital standards, Basel III 

cap standards, they don’t directly impact credit unions. But current 

capital requirements for credit unions are not related to the level 

of risk within each individual portfolio. But what implication does 

this have on your portfolio— 

Mr. BURROW. I really believe that—I am sorry, I didn’t mean to 

interrupt you. 

21 

Mr. MILLER. No, you didn’t. 

Mr. BURROW. I just really believe that risk-based capital is appropriate for credit unions because we are simply held to a percentage and that is that. The current system doesn’t really evaluate the 

riskiness of our assets. And I do believe that our peers in the banking industry have that benefit and they can build their capital 

based on the riskiness of their portfolio business. And I just think 

it is appropriate for us to do the same. 

One of the examples that is given all the time is, in the credit 

union world, a 30-year fixed-rate mortgage with 1 year left to pay 

on it is held at the same risk as an unsecured loan. You and I both 

know that 30-year mortgage with only 1 year left to go is a lot less 

risky than an unsecured loan. But there is no modification for that. 

Mr. MILLER. I briefly touched on it, but you mentioned in your 

testimony that there should be a look-back cost analysis for all new 

regulations after 3 years. Can you give us an example where the 

CFPB estimates of compliance costs have been totally off base? 

Mr. BURROW. One of the areas that is in front of us right now 

is the issue of remittances. I know that this is a part of the regulation that may seem like it only hits the East and West Coast 

maybe. But here in West Virginia, at our particular credit union, 

we have a lot of members who are Germans from Bayer Corporation. They are engineers, and they spent their time here in the 

States and now they are going back home. 

Or we have engineers from the States who are spending their 

time in Germany. To make a long story short, there is money that 

moves back and forth all the time. And this is a situation where, 

right now, we don’t even know if we comply and we have no idea 

what the change in the value between a dollar and a euro is going 

to be and all that kind of stuff. And it is going to get to the point 

where we may not even be able to offer that service. 

So, I think even though the intention is good, there are unintended consequences and costs related to what the CFPB is trying 

to do, and it is innocent, I realize. But they—it is just not known, 

and sometimes when you go ahead and do something like this, it 

is a lot more costly than you realize. 

Mr. MILLER. And on that, the Federal Credit Act restriction investment options for credit unions, what does this mean for your 

ability to manage portfolio and risk? 

Mr. BURROW. There should be some flexibility, I believe. And I 

think— 

Mr. MILLER. That could be for anybody who wants to answer. 

Mr. BURROW. Oh, I didn’t mean— 

Mr. MILLER. It doesn’t matter. 

Mr. BURROW. Sorry. 

Mr. MILLER. No, you are doing fine, unless somebody else wants 

to deal with that one. 

Mr. BURROW. One of the areas I think where we were talking 

about investment flexibility is investment options. And it would be 

nice if credit unions could invest—I think it is recommended in 

some—and by the way, thank you for even considering legislation 

for regulatory relief. We really appreciate that. 

Mr. MILLER. We are going to introduce it, so yes. 

22 

Mr. BURROW. But, if we could invest, say, 10 percent of our assets in investment grade securities, that would be a very nice option for us. 

Mr. MILLER. But you are restricted from doing that. 

Mr. BURROW. Correct, right now, we can’t do that. 

Mr. MILLER. Yes, okay, thank you. 

I yield back. 

Chairwoman CAPITO. Thank you. 

Mr. Heck for 5 minutes. 

Mr. HECK. Thank you, Madam Chairwoman. 

Question one relates to supplemental capital, your request for increased access. Anybody can answer. I am wondering if you are 

aware of any other kind of entity which is also nonprofit and regulated directly or indirectly by Federal or State Government—an example would be a mutual insurance company—which is similarly 

prohibited from having access to supplemental capital? And if not, 

why are you being singled out? Does anybody know the answer to 

that question? 

Ms. STEVENS. I am not aware of any other institutions who have 

been singled out like this, and— 

Mr. HECK. The others do have access to— 

Ms. STEVENS. They do have access to other forms of capital, and 

we are not sure why we shouldn’t have that same option. 

Mr. HECK. Question two: I represent an area of the country that 

is region five, or zone five. The data seem to indicate that we are 

being written up, via examination, for a 10 percent higher number 

of infractions. The data also seem to indicate that we are as safe 

and sound, and have no greater measure of risk for default, than 

other regions. Obviously, that is kind of a frustrating circumstance. 

What do you suggest we do to bring more consistency into this 

thing so different areas aren’t effectively being held to different 

standards in that kind of a fashion? What can we do? 

Mr. BURROW. I think it has been discussed, and I think it has 

merit, to have a—separate and apart review process, where it is 

not—for example, if we have an issue with our NCUA examination 

the only thing I can do right now is basically write a letter to the 

regional director. And I don’t want to say that it is not objective, 

but I have—I just don’t have a trust factor there, when my letter 

goes out. Am I going to—I feel like that I am going to be subject, 

possibly, to some blowback later. 

Mr. HECK. You want an independent appealable body. 

Mr. BURROW. Yes, sir, I do. 

Mr. HECK. So how would that exempt you from blowback? Because even if they ruled in your favor, it is the same examiner who 

is coming back next year. 

Mr. BURROW. No. There is no perfect world, I guess. But I think 

that would be a step in the right direction. Right now, I just don’t 

think it is—honestly, real-life— 

Mr. HECK. I would hope all your comments have been honest 

today, Mr. Burrow. 

[laughter]. 

I trust they are. 

Mr. BURROW. Yes, poor choice of words. Sorry about that. Anyway, real-life example. I will be brief. We had an issue with our 

23 

examiner in the examination in September. We didn’t get our report. It was February, and we still hadn’t gotten our report. My 

board was chomping at the bit—why haven’t you received it? We 

talked about it in the board meeting. I said, I can send a letter if 

the board authorizes me to. After a lot of discussion, I had the letter written. Everybody said, well, you know what? It is probably 

not going to go anywhere anyway, so forget it. 

Then, later on, the examiners were in. They read the board minutes, they see that that was even discussed. My examiner came to 

me—now, I have known her for years—and she was really upset 

that was even discussed. And I talk to her like I would another 

staff member, basically. I said, that is the board’s right. They wanted to know what is the examination’s finding. But you can see 

what I am talking about. 

Mr. HECK. Yes. 

Mr. BURROW. They are not always professional. They take it personally, and that is a concern. 

Ms. STEVENS. Three words—exam fairness legislation. 

Mr. HECK. Thank you. I will follow up on that, to be sure. Last 

question. Interestingly enough, one of the things I hear most often 

about from credit unions in my district is this little arcane remittance issue. As I understand it, the CFPB proposed an absolute 

limit of 100 per year. Is that not true? 

Ms. STEVENS. Oh, yes. It is true. 

Mr. BURROW. Yes, it is true. 

Mr. HECK. And as I understand it, you all had indicated that 

there might be a better way to skin that cat. Namely, not counting 

any more than once the same person from the same point of origin 

to the same destination. What has been the feedback to you from 

that otherwise seemingly common sensical idea from the CFPB as 

they are reevaluating the impact of their arbitrary— 

Mr. BURROW. I have not received anything back so I can’t— 

Mr. HECK. You don’t know? 

Mr. BURROW. No. 

Ms. STEVENS. I have not heard of that particular solution, but I 

can say that 100 per month is—or, excuse me, 100 per year— 

Mr. HECK. Per year. 

Ms. STEVENS. —is absolutely too low. We are trying to get into 

that business. Our first foray into that business, the provider we 

contracted with totally went out of the business because it is so difficult, if not impossible, to comply. We are serving a Hispanic community in our area who has a great number of these remittances 

they need to do, and our estimates are that—what is that, two a 

week? Is that right? And if I have 1,300 members, and 50 percent 

of them are trying to do a remittance transfer—and they get a 

week—every week, 100 in no way addresses where we need to be. 

Mr. HECK. Thank you. 

My time has expired. I thank you for your indulgence, Madam 

Chairwoman. 

Chairwoman CAPITO. Thank you. Without objection, I would like 

to enter two statements into the record: one from the American 

Mutual Share Insurance Corporation; and one from the Coalition 

for Credit Union Access. 

Hearing no objections, it is so ordered. 

24 

Mr. Posey for 5 minutes. 

Mr. POSEY. Thank you, Madam Chairwoman. I was wondering if 

the three of you, or any of the three of you, are aware of any financial regulatory issues that the credit unions and the community 

banks agree should be changed. 

Mr. REIVER. One would be the Reg D. 

Mr. POSEY. I am sorry? 

Mr. REIVER. Reg D— 

Mr. POSEY. Reg D. 

Mr. REIVER. —would be one, which is—limits the number of 

transfers to six per month. Which is a very, very small number, 

given the way we transact business now. 

Mr. POSEY. Okay. 

Mr. REIVER. So that would be one, for sure. I think the CFPB, 

while the agency itself is doing a wonderful job in trying to work 

to protect consumers, there are some regulations that adversely impact not only the credit unions but the community banks, as well. 

This remittance rule being the largest of them, I am sure, that 

there would be complete agreement between both the credit unions 

and the community banks on that issue. 

Mr. POSEY. Okay. 

Ms. STEVENS. I would add, the exam fairness legislation that— 

I am really on the heels of that one. And the way FASB proposes 

to account for—requires to account for our loan losses. That would 

be another one that I think we could all get on board with that. 

Mr. BURROW. And I had a couple. 

Mr. POSEY. Please. 

Mr. BURROW. Privacy notices—notices. 

Ms. STEVENS. Yes. 

Mr. BURROW. I think we could agree upon that, and getting rid 

of all the redundancy there. And a big one, I think, for both of us 

would be the Durbin Amendment. It has done nothing but hurt 

interchange and make card programs less viable. And we are seeing it month by month. Or even though we are supposed to be exempt, our per transaction return is dropping as we speak. So that 

would be two areas. 

Mr. POSEY. I have heard both types of institutions also tell me 

that no two fill out a Reg Z, as in ‘‘zero,’’ the same. Have you heard 

that? 

Mr. BURROW. I can’t speak to that, I am sorry. 

Ms. STEVENS. I can’t answer that, but we can— 

Mr. BURROW. We can get back to you on it. 

Ms. STEVENS. Yes. 

Mr. POSEY. Okay. Non-accrual loans. Do you think the current 

evaluation of non-accrual loans—that the opinion of the examiner, 

the guy shouldn’t be able to make a payment—is appropriate? 

Mr. BURROW. Could you repeat that for me, please? 

Mr. POSEY. One of the examples we have had in some other hearings was regulators who came in and told bankers—the bankers 

were the first ones to mention it—that the regulator said a customer should not be able to make a payment on a loan so they put 

it on non-accrual. Now, it had been an 11-year-old loan and the 

customer had never been late one second, but the regulator, in his 

opinion, thought he shouldn’t be able to make the payment. So it 

25 

became a non-accrual loan. Do you ever encounter those type of 

problems? 

Ms. STEVENS. Not exactly like that. 

Mr. REIVER. Yes, we have encountered that type of overreaching 

suggestion by a regulator. We have not encountered that one, 

thankfully. But clearly, that is a—that type of practice would be 

something that would clearly be counter to our interests as credit 

unions or as bankers in serving our members and customers. 

Mr. POSEY. Have you had any problems with regulators that you 

are aware of that said any time you modify a loan it is going to 

go on non-accrual? 

Mr. BURROW. That has—no, I—no. Are you talking about troubled debt restructuring, those types of loans? 

Mr. POSEY. It could be that. It could be— 

Mr. BURROW. Yes, we do. 

Mr. POSEY. —just a mutual agreement to meet a common ground 

on an 11-year-old loan, when you were getting 12 percent? You 

would be glad to get 6 percent now, and you split the difference? 

Mr. BURROW. Yes, that is— 

Mr. POSEY. That is non-accrual. 

Mr. BURROW. We are talking about TDRs? 

Ms. STEVENS. Yes. 

Mr. POSEY. Yes. 

Mr. BURROW. Then I would absolutely, because that is an issue 

that has been kind of recent, and so yes. If that is what we are 

talking about. 

Ms. STEVENS. I think it is terminology, difference between nonaccrual, and troubled and restructured. 

Mr. BURROW. Troubled debt restructuring, yes. 

Ms. STEVENS. We do— 

Mr. POSEY. Did you ever know of anyone who got stuck with an 

eternal non-accrual loan because, for example, a couple was laid off 

from work and their parents made the payments for 2 months before they got new jobs. Never was a payment a second late, nothing 

was missed. They are making more money now than they did before. But the institution is stuck with a non-accrual loan for the life 

of the loan, basically. Have you ever heard anything like that? 

Mr. BURROW. Yes. 

Ms. STEVENS. Yes. 

Mr. BURROW. Yes, I know there are instances where either 

through your exam process—or sometimes if you have a private 

CPA firm—they will try to push you in that direction. 

Mr. POSEY. Okay. I have never asked the question when I talk 

to the Chamber of Commerce about credit unions. I do, usually, 

about banks. I said how many people in here think your banker 

doesn’t love you anymore? And everybody in the room except the 

bankers raised their hand. I will include you all next time I do 

that. 

Thank you, Madam Chairwoman. 

[laughter]. 

Chairwoman CAPITO. I would like to recognize Mr. Pittenger. No 

questions? Okay. 

Mr. Barr for 5 minutes for questions. 

26 

Mr. BARR. Thank you, Madam Chairwoman. For all the witnesses, can each of you all describe—each of you all have already 

testified that the regulatory burden is very challenging for credit 

unions today. Can each of you describe the regulatory environment 

prior to enactment of the Dodd-Frank law and the CFPB for credit 

unions? 

Ms. STEVENS. I will take that one on behalf of a small institution. 

We were able to concentrate on serving our members. Regulations 

that came forth seemed to make sense, were easier to comply with. 

These days, it is very difficult to even understand what some of the 

regulatory changes require. It takes hours and hours of time to 

comply with them. Our members don’t read the disclosures, they 

don’t understand why. We get blamed, often times, for making 

things more difficult for our members to do. 

And, frankly, they don’t produce any benefit. Truth in savings is 

an example of a regulation that did provide some benefit. Our 

members could look at APR versus APY and understand it. That 

was helpful. But not many things coming down the pipe are helpful 

to consumers now. 

Mr. REIVER. We are dealing with RESPA, as an example and the 

recent RESPA reform and the pending RESPA reform. I—amongst 

my other duties at Melrose Credit Union—am the agent who closes 

all of the real estate loans for them. And I have sat there closing 

hundreds, if not thousands, of loans. And invariably, what I am 

hearing from the members when they are given a stack of disclosures is something along the lines of how many trees did you kill, 

this is horrible, and can’t this all be automated, isn’t there a better 

way? 

I am not asking for them to say that. I am just there to help 

close the loan for my credit union. Those are unsolicited reactions 

from the members who are supposed to be the beneficiaries of these 

disclosures. I think they would much rather see our time, resources, and money spent on offering better or less expensive products than on paperwork that they just don’t care to read. It is counterproductive. 

Mr. BARR. Mr. Burrow, you testified that the number of credit 

unions had declined. And you attributed the decline of 700 or so 

credit unions and the consolidation in the credit union industry to 

the increasing complexity and volume of compliance costs. What 

impact do you see for the consumer? What impact do you see as 

a result of the compliance-induced consolidation in the industry? 

Mr. BURROW. Probably on a couple of fronts. First of all, when 

you have fewer credit unions out there for choice, that hurts the 

consumer. Reynolds Memorial did a fine job for many, many years. 

Now, they are gone. We are going to try to continue to do a fine 

job for their members, but the fact remains that those who wanted 

to continue to deal with Reynolds Memorial can’t do that anymore. 

So, there is a choice taken away. 

Also, when compliance becomes too burdensome, a cost-benefit 

analysis by the credit union has to be done. And if the compliance 

costs are so great to adding that service or keeping that service, decisions have to be made, do we add a new service that our members 

want, or worse than that, do we take away one they got used to? 

And to that point specifically, the availability of certain financial 

27 

products for consumers specifically—and what I am hearing from 

credit unions in Kentucky is the open-ended lending rules are restricting access to certain products. 

Mr. BARR. Can you speak to that? 

Mr. BURROW. Do you want to jump in, or—I can speak to that. 

Open-ended lending, for many, many years, was a very viable way 

for members just to access credit that they have already established at the credit union with a lot of ease, and little paperwork. 

Call up, you already have the open-end plan approved. I need some 

money dumped in my checking account. Sure, Joe, I will go ahead 

and get that done, sign the note, we are done. 

But now, because we want to protect the member from bad lenders, we are going to go back in time to when I first started 30 years 

ago, where you have a piece of paper for everything. And members 

hate it. 

Mr. BARR. One final quick question for Mr. Reiver. You testified 

about establishing a process for credit unions to share their example experience without fear of retaliation. Can you give me an example of concern about retaliation? 

Mr. REIVER. Again, our NCUA examiners are very thorough. But 

while we haven’t had any direct—that we can directly attribute to 

making complaints, to reaching out, clearly we had occasions 

where, from one year to the next, especially when we have the 

same examiner, where there is a change, a very noticeable change 

in attitude, a very noticeable change in approach. And it is not 

positive. 

Mr. BARR. Thank you. 

Chairwoman CAPITO. Thank you. The gentleman’s time has expired. 

Mr. Stutzman for 5 minutes. 

Mr. STUTZMAN. Thank you, Madam Chairwoman. And I thank 

the witnesses for your testimony and comments today. 

Ms. Stevens, I would like to follow up a little bit on Mr. Heck 

and Mr. Duffy’s questioning and comments regarding supplemental 

capital. Could you give us just a little bit of history behind that, 

and why—when did that law come into effect? What is the history 

behind that, to kind of help us understand better why you are the 

one institution that doesn’t have access to supplemental capital? 

Ms. STEVENS. I really, again, don’t understand why we don’t. We 

have limits that were statutory net worth requirements that were 

put into place with the enactment of H.R. 1151 years ago. And, 

again, the only way we can respond to our needs for net worth is 

to raise that money through retained earnings. I mentioned earlier 

that we are in a situation; we are trying to reach out to a Hispanic 

community in our field of membership. 

And it is very difficult. There is resources required for that, and 

today our margins are compressed. We are spending more and 

more time on regulatory burden and other issues. And the ability 

to raise capital is difficult, particularly in times of economic stress. 

It would be great to be able to reach out, to have other sources for 

capital to shore up, and move into the future and provide services 

for our members. 

Mr. STUTZMAN. Okay, thank you. This is a question for any of 

the three of you. Last week, it was reported that the White House 

28 

is encouraging lenders to use more subjective judgment in determining whether to offer a loan. Could you talk a little bit about 

maybe how this contradicts Dodd-Frank, potentially? Does this 

seem to be a mixed message sent to you all? Would anyone like to 

comment regarding that? 

Mr. REIVER. Yes, I would be happy to address that. We had 

talked earlier about Qualified Mortgages. As credit unions, we do 

know our members. And that gives us a unique ability, as a financial institution, to really evaluate each loan, taking into account 

factors that we only know by virtue of our relationship with our 

member. I guess that is what we would refer to as ‘‘subjective 

standards,’’ something other than debt to income, cash flow ratios, 

credit score. 

So clearly, there is a direct conflict between the message from 

the White House: Be subjective, serve your members, and legislation that requires you to go down a checklist and the loan is approved or not approved based on a checklist that is created by 

somebody who might not, in fact, have any expertise whatsoever in 

making loans. 

Mr. STUTZMAN. Because to me, it seems like you would be conflicted. What is a regulator going to expect, on one hand, because 

you do want to meet the needs and provide the services for your 

customers. But at the same time, you don’t want to put yourself in 

a position where you are potentially whacked for doing the wrong 

thing. Mr. Burrow? 

Mr. BURROW. Yes, I am just agreeing with you now. 

Mr. STUTZMAN. Okay. 

Mr. BURROW. If I could say ‘‘amen,’’ I would say ‘‘amen.’’ But the 

truth is, I agree with the White House’s idea on this. Because, really, that is what we have been dealing with for years and it is only 

getting worse. I was told a long time ago if you are running the 

credit union to please the examiners, you are not going to be pleasing the members in the long run. Now, that doesn’t mean we just 

throw caution to the wind. But lending is not an exact science. 

It can’t be one plus one always equals two. To be a loan officer, 

you have to have some intuition, you have to know the people, you 

have to talk to people. If it was just a formula and no matter how 

hard we try we want to take the risk out of it. We are not in the 

risk elimination business. No, we are in the risk minimizing business. We want to manage that as best we can. But we will never 

eliminate it. And I have a lot of charge-offs I could show you where, 

if I took you back, every statistic, every ratio you would use—you 

would say, that has to be a good loan. And it turned out to be a 

charge-off. 

Mr. STUTZMAN. So have you seen an increase or decrease in 

mortgages lately over the last, let’s say, 6 months? 

Mr. BURROW. We have had very good mortgage— 

Mr. STUTZMAN. Increase? An increase in mortgage applications? 

Mr. BURROW. Yes. 

Mr. STUTZMAN. How about the other two? 

Mr. REIVER. Yes. 

Mr. STUTZMAN. Same? 

Mr. REIVER. Things seem to be moving in a positive direction. 

Mr. STUTZMAN. I am sorry? 

29 

Mr. REIVER. Things seem to be moving in a position direction in 

terms of number of applications. 

Mr. STUTZMAN. Moving better? Good, good, good. 

Thank you, Madam Chairwoman. I yield back. 

Chairwoman CAPITO. Thank you. 

Mr. Pittenger? 

Mr. PITTENGER. Thank you, Madam Chairwoman. I would like to 

ask one question just for clarity. Have you seen consolidation in 

your industry like is taking place in the community banks? I don’t 

know that I heard that clearly. They have gone through a tremendous amount of consolidation. I served on one for many years. And 

just the compliance costs, the regulatory environment. Has that impacted all of you the same? 

Ms. STEVENS. Absolutely. I would say we are losing—I have 

heard this statistic that we are losing about one credit union per 

day. Consolidation, there are a number of reasons for it. But in our 

area, a huge piece of it has to do with being able to comply with 

the regulatory burden that we face. It is just too much. One of my 

best friends retired last week. She loves credit unions, but she can’t 

deal with the regulatory burden anymore. 

If there is not someone who is going to step to the plate and take 

care of that, consolidation seems to be the answer. 

Mr. PITTENGER. Thank you. 

I yield back my time. 

Chairwoman CAPITO. Thank you. 

Mr. Royce for 5 minutes. 

Mr. ROYCE. Thank you, Madam Chairwoman. Getting to this 

member business lending cap, our legislation right now has 90 

House cosponsors. And I—for my constituents, I will just tell you 

what I have heard. And that is the stories about the jobs created 

or maintained in California through the access to credit unions because such a high percentage of small businesses get their loan request turned down when they are attempting to extend their credit. 

And we are in an environment today where, for many of these 

small businesses, the credit crunch is leading to a situation where 

they either have to downsize or go out of business if they don’t 

have access to that extension of the line of credit, or a new loan 

when their loan rolls over. So what is the market you see out there 

when you talk to people in the credit union line or when you talk 

to entrepreneurs who are trying to get access to credit? 

Are these same loans going to be offered if credit unions can’t 

step up to the plate and do more small business lending? Or are 

those small businesses out there today going to be in a position 

where they have to contract? And do you see other businesses that 

could benefit from this increase in the member business lending 

cap? Let me just hear your thoughts on that. 

Mr. BURROW. Okay, could I respond to that? I think that there 

are a lot of opportunities being missed. I know in our credit union, 

for example, anything that is over $50,000 is considered to be a 

business loan in terms of compliance issues. And I have had a 

number of individuals who are employed in some type of secular 

employment—whether it be at the chemical plant, or wherever they 

might be—but they may also have their own, let’s say, a contracting business on the side. 

30 

A guy comes in, he wants a $100,000 loan for a backhoe. I don’t 

have any way of getting that to him, because it is over $50,000. I 

don’t have the loan officer in place, I don’t have everything in place 

to comply with the regulations as they sit now, so I have to turn 

him away. And a $100,000 loan is really not that big of a loan. 

Most banks aren’t interested in it, so he may be going without. 

Mr. ROYCE. What I see, when I talk to owners of small businesses—gas stations, hair salons, small manufacturing, light manufacturing—I very much hear this concern. And you look at some 

of the success stories. We had two firefighters in their credit union. 

They were able to get a loan. They didn’t like the coffee at the fire 

hall so they started their own little operation. Firemen’s Brew I 

think is what they call it in L.A. It is now a full-time brewery, it 

is a coffee importer, it is a restaurant. 

And there are so many examples like that, when you have the 

smallest start-ups. And that is where most of the employment 

comes from is when you create those start-ups. Those are the ones 

that 85 percent of the time are turned down when they go, normally, for a loan. Yet this is the area of expertise for these credit 

unions. But with that cap, you are not able to—and many credit 

unions aren’t even able to go into that line of work. Because how 

do you sustain something when you are capped at 12.5 percent? 

But there is another issue here, and that is how examiners currently treat your business loan portfolio compared to other financial institutions as it relates to non-owner-occupied properties. 

Could you discuss that for a moment? 

Ms. STEVENS. Yes. In fact, in my testimony, this is something we 

talked about earlier. Currently, if a bank issues this type of loan, 

it is considered a residential loan. If a credit union does it, it is 

considered a business loan. And we think that disparity should be 

fixed. 

Mr. ROYCE. One more example of a change we could make with 

this legislation which would really open up the market, we are 

talking about trying to have the market recover in terms of apartments. And here, you have a difference in treatment that prevents 

access to capital coming into the market. 

Madam Chairwoman, let me yield back. 

Chairwoman CAPITO. The gentleman yields back. 

With that, I see we have completed the questions. I want to 

thank the witnesses for their testimony and for their patience. We 

have learned a lot. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

Without objection, this hearing is adjourned. Thank you. 

[Whereupon, at 4:35 p.m., the hearing was adjourned.] 

(31) 

A P P E N D I X 

April 10, 2013 

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