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Under fire from farm state elected officials, the National Credit Union Administration board emphasized Thursday, March 17, that the agency will not micromanage credit union policies as credit unions consider the risks of climate change.
“Credit unions, not the NCUA, are best positioned to assess various risks and opportunities within their field of membership,” the board’s five-year strategic plan states. “Credit unions will need to make their own decisions on diversification and expanded fields of membership.”
The board adopted its strategic plan and its one-year performance plan during Thursday’s meeting.
When the NCUA issued a draft version of its strategic plan, farm state House and Senate Republicans, as well as state officials from North Dakota urged the agency to drop any language that could lead to adoption of new regulations and increased examinations at credit unions whose fields of membership include rural and agricultural communities.
Board members on Thursday emphasized that it was not taking any action that could have a chilling effect on credit unions in agricultural areas. “I have consulted with the Office of General Counsel, and as a legal matter, the Board adoption of the strategic plan does not change or alter NCUA policy and should not be interpreted by anyone to implement a future policy change,” board member Rodney Hood said. “Changing policy will require a future Board action.”
It was clear during the meeting that a partisan division on the board is driving climate policy.
Republicans Hood and Kyle Hauptman expressed a desire to tread lightly on climate issues. “If the climate decision was just up to me, I would not have climate-related financial risks in the strategic plan,” Hood said.
Regarding membership affected by climate, credit unions, not the NCUA, are best positioned to assess various risks and opportunities within their field of membership,” Hauptman said.” Credit unions need to make their own decisions on diversification and expanded fields of membership.”
Chairman Todd Harper, a Democrat, has supported efforts by financial regulators to push banks and credit unions to assess the risks that climate change pose.
The board agreed to publish a formal request for information seeking input from credit union stakeholders about climate-related financial risks.
The board also expressed concern about consolidation in the credit union industry as well as the lack of new groups seeking credit union charters. “If these long-running consolidation trends continue, there will be fewer credit unions in operation in 2026 and those that remain will be considerably larger and more complex,” the plan stated.
The board agreed to streamline its chartering for new credit unions and increase the transparency in the chartering process. The board also agreed to propose at least one change updating its fields of membership or chartering rules. In addition, the board set a goal of chartering at least three new credit unions this year.
Over the past year, the NCUA board also has been divided along partisan lines on whether the agency should be conducting separate consumer protection exams. Harper has pushed for an increased emphasis on consumer protection. In its strategic and performance plans, the board agreed to complete at least 80 fair lending examinations or supervision contacts this year. In addition, the board agreed to perform quality control reviews on 200 examination reports this year to determine if consumer protection issues were adequately addressed. The board also agreed to issue guidance or conduct outreach twice a year addressing common problems found in those reviews.
Addressing another controversial issue, Hood pressed agency officials to confirm that while examiners may ask questions about a credit union’s overdraft policies, they may not sanction an institution for its policies.
Consumer Financial Protection Bureau Director Rohit Chopra has solicited comments on financial institution overdraft policies and Harper has said that some credit union policies are onerous. In recent months, several banks and credit unions have announced they will eliminate overdraft fees.
NCUA CFO Eugene Scheid said that examiners may review a credit union’s overdraft fees and may criticize them if problems are found. He said that the agency is collecting credit union overdraft policies to determine if any rule changes are warranted. He told Hood that the NCUA board would have to approve any policy changes.
Board members also expressed dismay at Congress’s failure to make permanent the temporary changes to the agency’s Central Liquidity Facility. As the coronavirus crisis developed, Congress made temporary changes to the CLF to make certain that if credit unions needed help, the CLF could provide it. Hood said that there are a few legislative vehicles still available for Congress to make those changes.
The board also received an update on the Corporate System Resolution process. Agency staff told the board that the NCUA has returned almost $2.2 billion to member capital account holders.