ABA calls for 'top-to-bottom' review of credit union industry

The American Bankers Association has requested that the National Credit Union Administration complete a “top-to-bottom assessment" of the credit union industry.

The request comes after a study funded by the ABA and produced by Federal Financial Analytics was released on Tuesday. That report found that credit unions were failing in their mission in reaching low-income consumers.

In a new letter by ABA President and CEO Rob Nichols, the banking association called on NCUA to assess whether credit unions are meeting their targeted, statutory mission in serving people of "small means." Additionally, the ABA suggested the regulator's Office of the Inspector General investigate the report's findings.

The NCUA declined a request for comment.

“Federal Financial Analytics’ report identifies several troubling issues that merit further investigation by NCUA’s Inspector General, and action by the NCUA Board,” Nichols said in the letter. “This report should serve as a wake-up call to the agency that this $1.5 trillion industry cannot be trusted to meet its statutory mission to serve low- and moderate-income households without appropriate oversight.”

Five points were highlighted in Thursday’s letter that stemmed from the original report, including a request for NCUA to impose mission-related requirements and a second look at how the regulatory agency defines “low-income.”

The Federal Financial Analytics report questioned the NCUA's definition of who qualifies as a low-income member as being too generous. Between 2008 and 2016, the number of low-income credit unions soared by 80%. By the end of 2018, these institutions had $542.4 billion in assets, or 38% of the industry’s total assets, the study found.

The most recent ABA letter also called out NCUA's regulation and supervision of the CU industry. Nichols noted that CUs that acquire banks illustrate a changed mission and called for a reexamination of the "provident or productive" mandate of credit union lending.

The letter arrives after the CU industry celebrated the 85th anniversary of the Federal Credit Union Act on Wednesday. It was addressed to all three members of the NCUA board in addition to James Hagen, the NCUA's Inspector General.

“[The] paper suggests that NCUA should be concerned that despite the unprecedented public subsidies and exemption from important bank-like regulations, many credit unions, particularly those of a larger nature, are simply falling short of achieving the mission intended 85 years ago,” Nichols concluded.