Ahead of the NCUA’s decision to undergo a voluntary regulatory review under the Economic Growth and Regulatory Paperwork Reduction Act, America’s Credit Unions has submitted a letter to the organization calling for significant changes and reforms for the NCUA to consider.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires the Federal Financial Institutions Examination Council and federal bank regulatory agencies to review their regulations every 10 years to identify any outdated, unnecessary, or unduly burdensome regulations applicable to insured depository institutions. While the NCUA is not required to undergo this review, the agency has decided to participate voluntarily.
As part of the process, the NCUA will, over the next two years, publish four Federal Register notices on various topics the organization will be considering and reexamining. The letter from America’s Credit Unions is in response to the first of these which was published on May 23rd of this year with comments due by August 21st.
The first Federal Register will specifically consider the topics of “Applications and Reporting” as well as “Powers and Activities.” In its letter, America’s Credit Unions suggested large changes and improvements for both of these categories.
Under the category of “Applications and Reporting,” America’s Credit Unions requested the NCUA to make changes to two specific areas: field of membership and member expulsion processes. In regard to field of membership laws, the letter stated that current restrictions—specifically those requiring potential members to be within 25 miles of a facility—are outdated as geographical location is irrelevant for many nowadays who prefer to do their banking digitally.
Instead, ACU proposed that the definition of a “facility” be altered to include online banking and mobile banking applications and expand the definition of a “service area” to include digital channels, citing dwindling physical branches and a member preference for digital services. Essentially, the new rules would rework the traditional field of membership to allow anyone with access to a credit union’s website and application to become a member, regardless of their location.
“It is time for the NCUA to recognize that the world has changed and that most consumers find equal, if not greater convenience, when obtaining financial products and services through a digital platform. Failure to account for such change will hinder the mission of federal credit unions to serve their communities and invest capital in technologies that are convenient and useful,” the letter said. “By contrast, a requirement to establish physical services facilities imposes an arbitrary limit on credit union growth and perpetuates outdated assumptions about the importance of
physical branches, which are often regarded as symbolically important but not generally thought of as practically more useful.”
As for member expulsion processes, ACU suggested that the NCUA remove requirements that state that in order to qualify for expulsion, a member must commit the same act twice within a two year period and receive a written warning with enough detail for the member to understand. ACU requested that A) the language be changed from “enough detail for the member to understand” to “enough detail to inform the member.”
Additionally, they suggested that the time limit of two years be removed, claiming it was unnecessary and that as the member had been given a written warning under the updated bylaws, they were already aware that expulsion would occur if the act was repeated. The letter also asked that in the event a member challenges the expulsion and is granted a hearing, the board should be allowed 90 days to vote instead of the current 30 days, stating it is an insufficient amount of time.
The letter covered a much wider range of topics under the “Powers and Authority” including changing the time limit in which to resolve overdraft accounts, lowering the bar for a credit union to obtain low-income designation (such as through a narrative instead of statistics), expanding the definition of “charitable organization” to increase charitable donation accounts, and more.
ACU also requested that the interest rate cap of 15% be changed to a floating permissible interest rate ceiling, stating, “There is no reasonable fixed permissible interest rate ceiling the NCUA could establish that would permanently resolve the issues unnecessarily imposed on FCUs and their communities by the FCU Act’s arbitrarily low 15 percent rate. The NCUA Board can permanently resolve these issues only by establishing a floating permissible interest rate ceiling. Rather than maintain the nearly four decades long trend of approving the 18 percent interest rate, adopting a floating interest rate ceiling would enable FCUs to more fairly and fully serve their communities in every interest rate environment throughout economic cycles.”
To see all the changes America’s Credit Unions is advocating for, you can view the letter in its entirety here.
