In a letter sent on Friday to U.S. Rep. Gregory Meeks, D-5, New York Credit Union Association President/CEO William J. Mellin called on the congressman to support a “stop and study” approach to the Financial Accounting Standards Board’s current expected credit losses standard.
Meeks, considered a moderate Democrat, serves on the House Financial Services Committee and is chairman of the Subcommittee on Consumer Protections & Financial Institutions.
In the letter, Mellin expressed support for S.1564, the Continued Encouragement for Consumer Lending Act, which would require a quantitative study on the potential impact of CECL.
“The Association maintains CECL is likely inappropriate for credit unions,” Mellin wrote. “Credit unions have not historically struggled with funding their allowance for loan losses. And, because credit unions are local, member-owned financial institutions, they often have personal knowledge of the consumer they are lending to, which has resulted in their own unique way of monitoring expected loan losses.”
He also noted credit unions don’t have outside investors, which the FASB viewed as a particularly interested party in how institutions calculated potential loan losses.
“The Association understands and respects the FASB’s independence,” wrote Mellin. “But we also believe Congress has a role to play in the implementation of an accounting standard that would have such far-reaching consequences on the nation’s financial institutions. Implementing the CECL standard as-is would be an extraordinary and costly burden on credit unions, and drastically alter credit unions’ accounting practices.”
Simply put, he wrote, “any perceived benefits would not outweigh the immense compliance and operational mandates.”