NASCUS Encourages Senate to Defend Against Preemption in Regulatory Reform Bill

A special message from Mary Martha Fortney, President and CEO,
April 20, 2010

As the Senate regulatory reform legislation moves closer to a Senate floor consideration, NASCUS took the opportunity to again express the important role of state supervision in the financial regulatory system, as well as consumer protection.

In an April 19 letter to Senate Banking Committee Chairman Dodd (D-Conn.) and Ranking Member Richard Shelby (R-Ala.), NASCUS reiterated the role of state regulators in the nation’s financial system and the importance of defending against federal preemption. Further, we stressed the importance of state regulators’ role in protecting consumers and mitigating systemic risk.

NASCUS further stated that given the shared responsibility of state and federal regulators to protect consumers against unfair and fraudulent practices in the financial services market, state regulators support enhanced federal consumer safeguards to complement the robust state oversight. However, we encourage the Senate to reject any amendments that weaken the state’s ability to protect its consumers in this legislation. The encroachment of federal preemption only weakens the states’ strong front-line defense against deceptive and unlawful financial service practices.

The Senate regulatory reform legislation attempts to mitigate and to identify potential sources of systemic risk in the financial services system. NASCUS told Dodd and Shelby that state regulators and their rich knowledge and expertise must have a valued role in the nation’s mechanisms to mitigate systemic risk. NASCUS requested that the Senate recognize that the states need to have a seat at the table when addressing systemic risk issues. State regulators are in a position to detect problems on the local level before they may become a greater national risk. 

NASCUS also emphasized the critical need for credit union capital reform. NASCUS has long believed that capital reform is an important to regulatory enhancements for credit unions, in particular the need for access to supplemental capital for credit unions.

As the legislation nears Senate action, NASCUS will keep you posted on its website. We will continue to represent the state system’s interests before Congress on this important issue. To view our letter, visit this link.