Introduction (5 minutes)
While talking points are provided for each of the issues, the best communication method is for you to tell your credit union’s story. Be prepared to share with regulators how each of these issues have or will affect your credit union, your members, and your community.

The Credit Union Difference
Credit unions are the original consumer financial protectors. They are not-for-profit, member-owned, and community-centered financial institutions. Their main focus is to serve their members and help them reach their financial goals.

Credit unions are focused on serving a common field of membership based around characteristics such as employer or industry, membership in an organization, or the member’s community. Credit unions serve members from diverse socioeconomic backgrounds in both rural and urban areas.

Currently, 13.8 million members in California opt to partner with credit unions for their financial needs. Credit unions invest in the financial wellbeing and stability of all communities. The unwavering commitment of credit unions lies in ensuring that members gains access to secure and affordable services tailored to their distinct requirements, fostering the attainment of their financial objectives.

Highlighted below are additional noteworthy distinctions:

• The surplus net income of credit unions is distributed equally among all members.
• Credit unions provide members with financial literacy and counseling.
• Nationally, credit unions generate annual savings of $13.6 billion for their members.

Regulatory Philosophy: Hold Regulators Accountable
The regulatory approach of California credit unions and regulators should prioritize collaboration on safety, soundness, and consumer protection, while also recognizing the need for flexibility to accommodate the unique operational dynamics of credit unions throughout the state.

Regulatory burden remains a significant challenge for credit unions. We advocate for financial regulators to assess the impact of regulations on the credit union industry and consumers. Streamlining current regulations, eliminating outdated and inconsistent requirements, providing appropriate exemptions for credit unions, and restraining future regulatory demands are necessary actions.

Credit unions often serve as the best option for consumers and small businesses seeking affordable and equitable financial services, as their customers are also owners. This fundamental distinction — where credit union customers are member-owners — is absent in the for-profit banking sector.

Our “Ask” of Regulators:

• Please ensure regulators consider credit unions’ unique structure and commitment to serving their members and communities through tailored regulations.

Address Right-Sized Rules and So-Called ‘Junk Fees’

The conversation surrounding junk fees, spanning from airline tickets to concert tickets, has gained significant attention, with discussions being propelled by figures ranging from President Joe Biden to regulatory agencies like the Consumer Financial Protection Bureau (CFPB).

CFPB Director Rohit Chopra has notably emphasized so-called “junk fees” as a priority issue for the bureau. This focus has resulted in three separate fee-related rules on the bureau’s rulemaking agenda: credit card late fees, overdraft protection, and non-sufficient fund (NSF) fees. In March 2024, the bureau issued its final rule to address late fees charged by card issuers that, together with their affiliates, have 1 million or more open credit card accounts (referred to as “larger card issuers”). This final rule adopts a late fee safe-harbor threshold of $8 for those issuers and provides that the annual adjustments reflecting changes in the Consumer Price Index (CPI) do not apply to this $8 amount.

In January 2024, the bureau proposed a rule to amend Regulations E and Z to remove regulatory exceptions for overdraft credit provided by financial institutions with assets of $10 billion or more, thereby subjecting covered overdraft credit to Regulations Z, E, and CARD Act regulations required of similar extensions.

• Overdraft Fees — Credit union overdraft protection programs often wrongfully get included in the junk fee conversation. Credit union overdraft programs require opt-in service by members. Members may choose overdraft programming to ameliorate pay-and-bill scheduling discrepancies or to prevent turning to a payday lender. Oftentimes, members who opt-in do so to avoid higher credit card interest rates or address emergency funding matters. Any legislative or regulatory restrictions on credit union overdraft protection services would inhibit the ability of credit unions to help their members resolve short-term financial difficulties.
• Credit Card Late Fees — Credit unions strongly object to the bureau’s final rule, as it will negatively impact the ability of credit unions to offer viable credit card programs, manage the risks associated with those programs, and increase the cost of credit cards for all cardholding members (not just those incurring late payment fees).
• NSF Fees — The bureau acknowledges that the subject of its proposed rule (fees charged on instantaneously declined transactions) is extremely uncommon. However, the bureau chooses to publicize this non-existent practice to further bolster the unfair perception of financial institutions as benefiting from the misfortune of consumers. More concerning than its substance, the CFPB’s proposed rule espouses an expansive interpretation of the bureau’s power under the abusive prong of UDAAP (unfair, deceptive, or abusive acts or practices) that could create uncertainty for credit unions and have significant implications for a wide variety of products and services. Under the rule, the bureau determined that a fee charged as a result of a consumer’s lack of understanding of their account balance and the risks, costs, or conditions associated with a transaction would be abusive, even if the consumer’s lack of understanding was not reasonable. Such a broad interpretation of the abusive prong by the bureau could lead to almost any disliked practice being deemed abusive and completely disregards consumer responsibility and awareness.

Credit unions have always served their members diligently, fostering trust by providing personalized financial services. That’s why we oppose restrictions on access to products and services that consumers value and rely on for peace of mind.

What to Share:

• Gather positive stories from your credit union members highlighting the advantages of your overdraft program. Additionally, share details about the program itself, your outreach efforts to promote responsible usage among members, and any relevant data or statistics demonstrating its effectiveness.

Our “Ask” of Regulators:

• Prevent arbitrary barriers to consumers and businesses that rely on credit unions. Establish right-sized rules and differentiate the safe, affordable, and regulated fees charged by depository institutions from the CFPB’s misleading “junk fees” terminology.

Digital Currency

In May 2022, Governor Gavin Newsom issued Executive Order N-9-22 (EO) to ensure California engages early and proactively with nascent blockchain and web3 (web 3.0) industries, with the goal of ensuring continued consumer protections, innovation, job growth, and advancing equity and regulatory clarity, among other strategic outcomes.

The governor’s executive order calls on the California Department of Financial Protection and Innovation (DFPI) to issue crypto-related guidance to banks and credit unions. The DFPI paved the way for future guidance by conducting a survey between late July and early September 2022, and collecting responses from nearly 200 financial institutions. Preliminary findings indicate roughly 20 percent of respondents offer, or plan to offer, crypto asset-related products or services, and that credit unions are the type of licensee most likely to offer such products or services. The DFPI was expected to issue guidance to state-licensed banks and credit unions in March 2023.

The digital assets marketplace demands a comprehensive regulatory framework that provides consistent oversight for similar products and services. This approach should be coordinated among prudential regulators to provide clarity and a level playing field that encourages competition, provides appropriate protection for consumers, and promotes responsible innovation.

The DFPI should issue guidance allowing credit unions to offer custodial services or wallets to members. The DFPI should also work with other interagency working groups on digital assets to ensure the interests of credit unions are strongly represented.

Our “Ask” of Regulators:

• Further information on how credit unions can offer cryptocurrency-related products and services is necessary to maintain parity with other financial institutions.

Support Innovation and Emerging Technology

In October 2023, President Joe Biden issued an executive order directing federal agencies to pursue new standards for artificial intelligence (AI) in support of safety and security, protecting Americans’ privacy, advancing equity and civil rights, promoting innovation and competition, and more. The executive order explicitly calls for developing standards and best practices to protect consumers from AI-enabled fraud, enacting bipartisan data privacy legislation, evaluating the collection and use of consumers’ data, and providing clear guidance to ensure AI does not exacerbate discrimination in lending.

As technological advancements continue to reshape industries, AI emerges as a transformative force within the financial sector, promising enhanced operational efficiency, risk management, and personalized member experiences. It has also become more of a focus for regulators to address potential risks while ensuring proper guidance that supports innovation. Therefore, it is paramount for credit unions and regulators to engage in constructive dialogue to ensure the ethical and compliant adoption of AI technologies.

Our “Ask” of Regulators:

• By fostering collaboration between regulators and credit unions, there can be an established regulatory framework that promotes innovation while allowing credit unions the regulatory flexibility to incorporate innovative technological solutions.

Financial Wellbeing and Inclusion

Credit unions provide accessible and affordable basic financial services to people of all means and encourage the equitable distribution of capital across all individuals, families, communities, and small businesses. Our mission enables us to continue the work of improving our members’ financial wellbeing and advancing the communities they serve.

• Credit unions have a strong commitment to serving underserved and low-income communities.

What to Share:

• Share stories from your credit union’s efforts and successes in promoting financial inclusion and community development, such as providing affordable loans, financial education, and outreach programs.

Our “Ask” of Regulators:

• Credit unions play an important role in providing financial services in the marketplace, especially to low-to-moderate income households.