How Much Do Regulations Cost Credit Unions? CUNA Now Has A Number


Bill Hampel, CUNA

WASHINGTON–CUNA will soon formally release a report showing the cost to credit unions from regulations every year is approximately $6.6 billion.

The report follows a year-long effort by both CUNA and the credit unions that participated in the analysis to quantify just what the oft-cited “regulatory burden” really costs CUs and their members with numbers that can be shown to policymakers and elected officials.

The CUNA Study on the Cost of Regulatory Burden, conducted for CUNA by Scottsdale, Ariz.-based Cornerstone Advisors, arrived at the $6.6-billion figure by examining regulation-related costs in two ways: increased expenses and reduced revenue opportunities.

According to CUNA’s Chief Policy Officer, Bill Hampel, in 2014 the cost to credit unions of increased expenses from regulation was 49 basis points. The cost of reduced revenue opportunities was 10 basis points.  Hampel said the figures are conservative estimates, as Cornerstone was cautious to ensure only that which could be documented was included.

“If there was any doubt, we left it out,” said Hampel.

Top Advocacy Concern

Hampel told that approximately a year ago CUNA began serious discussions regarding the cost of the regulatory burden, after surveys of CUs repeatedly showed it to be their number-one advocacy concern.

Initially there was discussion of conducting a survey around the issue, but that idea was rejected as it would likely result in anecdotal evidence, not quantifiable data.

In April of 2015 CUNA hired Cornerstone Advisors to lead the effort. An initial three credit unions were selected to participate—one small, one mid-size and one large CU, said Hampel—to work with Cornerstone. That effort included on-site visits and interviews about how regulations were affecting those CUs.

From that a survey was developed that Hampel described as a “pretty in-depth data collection instrument.” CUNA then invited credit unions to participate in the new survey, including hosting a webinar to explain what would be involved.

“We told the participants this would not be an easy task,” said Hampel.

Fifty-three CUs eventually agreed to participate. Another webinar for participants was held, and phone support was made available for the five weeks the survey was in the field.

“The end result is pretty vigorously collected data on the financial impact and the cost of regulation,” Hampel said.

Approximately one-third of the participating CUs had assets of $100 million or less.

In addition to credit unions identifying regulatory burden as a primary concern, Hampel said the analysis is designed to be a pragmatic response to questions often raised in Washington.

“Policymakers would often say, ‘You say this is a burden, but how much is it costing you,?’” said Hampel. “Several senators asked just that question earlier this year during a hearing. We did this so we could have an answer.”

As Hampel indicated, CUNA believes the $6.6-billion figure is conservative. He noted that in the area of lost revenue opportunities, for instance, credit unions pointed to reduced first mortgage lending due to all the regulations. That revenue was not included in the estimate.

Hampel said CUNA and credit unions will now be able to show elected officials and policymakers funds that could have gone toward higher dividends on savings, lower loan rates, lower fees, or investments in other services. The final report, which will not be released for at least another week, includes a section in which CEOs discuss how they could have used the funds that are otherwise going toward the cost of complying with regulations.

Weighing The Cost

Hampel said CUNA is being careful to stress that it does not believe there should be no regulation of credit unions.

“What we are saying is there is an awful lot of money being spent by credit unions on regulation,” he said, noting that with future regulations CUs will be able to line up the proposed benefits against the costs.

Once the full study is distributed to all CUNA-affiliated credit unions, Hampel said CUNA will then make decisions around the best strategy for using the analysis with policymakers and others. He said the report is expected to be 50-70 pages long, plus appendices, and as a result it’s unlikely most on Capitol Hill will read it.

Instead, Hampel said it’s most likely the analysis will be excerpted depending on what Congress may be discussing at a point in time.

The analysis of the cost or regulatory burden will not be conducted annually, with Hampel saying hiring Cornerstone was “not cheap and this was not easy for the credit unions. They said it was like having another exam. All credit unions owe a significant debt of gratitude to the 56 who participated in this.”

Instead, he estimates the analysis has a shelf life of two-to-three years, and then may be conducted again.

“Obviously, our hope is that this will be used to reduce the regulatory burden,” said Hampel.

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Copyright Year: 2019
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