AFSA Supports Uniform CECL Standards
Today, the American Financial Services Association (AFSA) joined several other financial services trade associations in a letter urging Congressional leaders to pass legislation to uniformly apply the Federal Accounting Standards Board’s (FASB) Current Expected Credit Loss (CECL) accounting standards to all financial institutions, including other non-depository institutions.
In March, when President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law, Congress only included a temporary option for insured depository institutions to delay implementing CECL reporting requirements until after the national emergency had ended. However, shortly after the CARES Act’s enactment, the Federal Reserve issued an interim final rule allowing only insured depository institutions the option to defer CECL rules until 2022.
Unfortunately, non-depository financial companies, including installment lending and vehicle finance companies, were mistakenly left out of the CARES Act and the Federal Reserve’s interim rule delaying CECL rules, creating a disparity between bank and non-bank entities. While the goal was to record credit losses earlier to reduce procyclicality, without a uniform standard for the entire financial services sector, the new CECL standard will actually exacerbate procyclicality by requiring increased capital, resulting in reduced credit availability and higher costs of credit, effects that will likely be exacerbated for low- and moderate-income consumers.
At this crucial time for American consumers and businesses, AFSA believes Congress should be looking for ways to expand ways for consumers to maintain their vehicles, homes, and personal lines of credit.
July 29th, 2020
