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Consumer Financial Protection: U.S. Proposals and International Experience

This report sketches the consumer financial protection proposals currently in play and compares them to pro-consumer structures around the world.

Executive Summary

This policy brief is part of an ongoing effort from the Filene Research Institute to illuminate credit unions’ changing regulatory landscape. The brief describes the experiences of credit unions around the world that operate under similar consumer protection schemes. 

It also describes briefly the proposed Consumer Financial Protection Agency (CFPA) offered by the U.S. House of Representatives and the Consumer Financial Protection Bureau (CFPB) proposed by the Senate. Both proposals are still in discussion, the outcomes of which are unclear, so this brief will refer generically to a consumer financial protection regulator (CFPR). It aims to describe the basic changes a consumer financial protection regulator would bring to credit unions.

What is the research about?

It is inherently difficult to research policy proposals in motion. Therefore, this brief seeks only to give a rough outline of the principles and issues involved in a new consumer protection regime. More concrete are the experiences of credit unions around the world that have already lived through changes in country-specific consumer financial protection. 

Therefore, we examine the consumer financial protection rules and their implications for credit unions in Australia, Canada, and Ireland. These three English-speaking countries have credit unions that operate in consumer and regulatory systems analogous to those of the United States. They also offer the convenience of hard data to illuminate the effects of a formal consumer financial protection scheme on natural person credit unions.

What are the credit union implications?

Credit unions’ size and history of dealing responsibly with members have protected most of them from the heaviest burden of the proposed CFPR. Nevertheless, any change is likely to entail new reporting requirements and an unknown level of compliance costs.

Also, as large banks and financial institutions are compelled to offer more transparent services, credit unions may have an even tougher time differentiating their own products. But the CFPR silver lining is that responsible practices and strong member advocacy may lead to stronger goodwill and more data to demonstrate a credit union difference.