AFSA Highlights Negative Effects of CECL for House Financial Services Committee

AFSA yesterday submitted a comment letter to House Financial Services Committee Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC) in advance of today's hearing entitled Oversight of Prudential Regulators: Ensuring the Safety, Soundness and Accountability of Megabanks and Other Depository Institutions. In the letter, AFSA highlighted the association’s concerns with the new Current Credit Expected Loss (CECL) standard and urged a delay in CECL’s implementation date until a thorough assessment is conducted by the Financial Accounting Standards Board or financial regulatory agencies.

"The CECL model makes fundamental changes to accounting standards that will adversely affect forms of consumer credit used by millions of Americans to improve their lives, such as vehicle financing, home mortgages, student loans, and traditional installment loans," Ann Carmichael, Vice President of Congressional Relations writes in the letter. "The impact on the cost and availability of these products could be significant, especially for low and moderate income consumers. CECL also creates pro-cyclical dynamics that could accelerate an economic downturn and impede growth.” She concluded, “It is essential that the consequences of such fundamental accounting changes on consumers, financial institutions, and the broader U.S. economy be clearly understood before implementation.”

The full letter is available here. A bipartisan group of House and Senate members also submitted letters of concerns on the CECL issue. The hearing will be live streamed on the committee's website.