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Credit Unions’ Financial Services Restrained By Regulations

The National Association of Federal Credit Unions (NAFCU) expressed their concerns surrounding credit unions’ efforts in rural communities and limitations they face due to regulatory restrictions prior to the Senate Banking Subcommittee hearing called “The State of Rural Banking: Challenges and Consequences” held Wednesday.

In a letter to the Senate Banking Subcommittee members, the NAFCU voiced their support for changes to be initiated to help better serve rural communities that are facing many challenges when seeking financial services.

“Credit unions are proud of their record of working in rural communities to provide the best financial services possible, but often face obstacles in form of regulatory restrictions that prevent them from doing more,” the letter stated. “NAFCU believes a more flexible definition of a rural district would increase availability of financial services to rural communities that might otherwise not have access to financial services.”

The NAFCU noted that limitations in National Credit Union Administration (NCUA) regulations prevent them from providing better financial services options, by allowing credit unions of certain charters to add rural districts to their field.

“While we appreciate NCUA’s efforts to allow credit unions to better serve rural communities, the NCUA definition of rural districts does limit the effectiveness of the regulation,” the NAFCU explained.

Currently, NCUA restricts the definition of rural districts to:

In addition, the NAFCU’s letter also addressed regulatory burdens such as the new mortgage lending regulations from the Consumer Financial Protection Bureau (CFPB) like the qualified mortgage (QM) rule, in particular. In addition, the NAFCU pointed out that the CFPB “does not always accurately identify all the rural areas across our nation.”

The association believes that the Financial Regulatory Improvement Act (FRIA) will help mitigate the impact of these regulatory burdens and remedy these issues.

“NAFCU believes that passing provisions such as these into law will be a significant step in addressing some of the major challenges facing the financial services industry in rural communities,” the letter concluded.

View the letter here: https://www.cuinsight.com/press-release/nafcu-letter-to-senate-banking-subcommittee-on-financial-institutions-and-consumer-protection-ahead-of-tomorrows-hearing [1]