Today, in the Subcommittee on Consumer Protection and Financial Institutions hearing, Ranking Member Congressman Blaine Luetkemeyer (MO-03) delivered the following opening statement at a hearing entitled “An Examination of the Decline of Minority Depository Institutions and the Impact on Underserved Communities.” In the hearing, Congressman Luetkemeyer highlighted the risk of the Current Expected Credit Loss (CECL) accounting standard to minority communities, and called on Chairwoman Maxine Waters and the full Committee to take action.

Thank you Mr. Chairman. Minority Depository Institutions (MDIs), like all financial institutions have struggled under the weight of the regulatory burden of Dodd-Frank. According to a Harvard University Study, Dodd-Frank has “created an uneven regulatory playing field.” This playing field resulted in an additional legal and compliance costs for small institutions, preventing them from serving their customers, particularly the businesses and consumers within their community.

MDI’s play a unique role in serving their community. According to the FDIC and the Fed, MDIs serve consumers in low- to-moderate income communities at higher rates than non-MDIs. This committee should be focused on alleviating the burden on these institutions so they can serve their community, specifically minority and LMI communities.

One such burden that will have a devastating effect on small depository institutions and particularly Minority Depository Institutions is the proposed CECL accounting standard. Now as many on this panel know, I could spend the length of this hearing discussing the pitfalls of this ill-conceived proposal. Instead I will simply read an excerpt from a letter to this Committee regarding CECL from the National Bankers Association, which identifies itself as the voice of minority banking in the United States.

“To the extent that CECL increases the costs of lending to borrowers that are perceived by regulators as being ‘riskier’ or of lower credit quality – such as low- and moderate-income consumers and small businesses located in low and moderate-income communities – the economics of our lending decisions could be altered dramatically.  This would further restrict access to credit for consumers and businesses that already experience limited credit options.”

In addition, I would like to read a statement from Center for Responsible Lending President Mike Calhoun on CECL in which he said, “As proposed, CECL creates a significant disincentive for lenders to originate loans to low- and moderate-income families and communities of color.”

I would like to ask unanimous consent that the full statements from both of these organizations be entered into the record.

The statements I just read are not unique. The truth is numerous consumer and industry groups have voiced concerns over CECL. Despite the warning signs these groups have raised, this Committee has not taken any formal action to better understand the affects CECL will have on low to moderate income consumers and minorities. No full Committee hearings, no Subcommittee hearings, no markups, nothing.

This inaction flies in the face of LMI borrowers and minority communities across the country who will be adversely impacted by this accounting standard. For all of the rhetoric from the other side of the aisle about how consumers and minorities can struggle in the financial services industry, the Democratic Leadership on this Committee remains woefully silent on an issue that has a direct impact on Minority Depository Institutions and the consumers they serve.

I specifically mentioned that the Democratic Leadership of this Committee has been inactive, because CECL is a bipartisan issue that has support from members on both sides of the aisle. Fifty-two bipartisan Members signed onto a bill to delay the implementation of CECL until a study is completed that examines access to credit for consumers.

In front of this Committee today are witnesses representing three separate organizations that have voiced serious concern over the effects CECL could have on their member institutions as well as the consumers they serve. And yet, this Committee has shown no interest in bringing this issue up, and in fact seems completely content to let CECL go into place despite the warning signs related to minority and low-income borrowers.

This Committee is tasked with ensuring a healthy financial services industry and promoting economic freedom for everyday Americans. That responsibility includes ensuring financial institutions are not driven out of the marketplace by onerous requirements and protecting the ability of consumers to gain access to credit.

With that said, I urge all of my colleagues on both sides of the aisle to call for a Committee hearing on CECL. And better yet, have FASB come before this Committee and defend this standard.