While the majority of the Dodd-Frank Wall Street Reform Act's regulatory changes is aimed at large, complex, financial institutions, portions of the act addressing mortgage reforms "may impose additional requirements and, thus, costs" on credit unions and other financial institutions, the U.S. Government Accountability Office (GAO) has said.
The impact of these mortgage reforms, though, depends on the results of future rulemakings, the GAO said. The GAO report, entitled "Community Banks and Credit Unions: Impact of the Dodd-Frank Act Depends Largely on Future Rule Makings," found that finance industry representatives are particularly concerned that Dodd-Frank regulatory changes imposed by the Consumer Financial Protection Bureau (CFPB) may force firms to exit certain lines of business.
The GAO report was compiled through data analysis, study reviews, and interviews with credit unions, banks, and state and federal regulators.
The additional time, resources, and effort it would take their institutions to address new regulatory requirements was a chief concern. Some also said the standardization of processes through CFPB regulations could reduce the ability of community banks and credit unions to offer differentiated products to better serve their communities.
The GAO noted that some regulators and industry representatives expected the potential cumulative effect of CFPB mortgage reforms to decrease lending practices. The mortgage reforms could also reduce community banks' and credit unions' advantages in rural communities and other niche markets.
However, some of these regulatory burdens could be relieved if the CFPB used its full exemption authority, the GAO said. In addition, several Dodd-Frank provisions, including deposit insurance reforms, Sarbanes-Oxley Act exemptions, and the CFPB's pending supervision of nonbanks, "could reduce costs and/or help level the playing field for community banks and credit unions," the GAO said.
Overall, the report noted, "it is too soon to determine the Dodd-Frank Act's overall impact on small business lending," as much of the work asked of the CFPB and other regulators has not been completed.
The CFPB and the National Credit Union Administration generally agreed with the report, the GAO said.
For more on the report, click here.