Are Examiners Overcompensating?

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GLENDALE, Calif. — The increasing number of CU failures and Congressional attention on NCUA has some CEOs saying examiners are turning up the heat.

Sources told Credit Union Journal that NCUA is "overcompensating" and finding more examination issues than in the past when examiners stop by.

"NCUA is now in their reactive mode," said Stuart Perlitsh, CEO of the $305-million Glendale Area Schools FCU. "They are heavy on regulation so they can demonstrate to Washington they can handle the challenges and now is not the time to consolidate federal financial regulatory agencies. They are saying, 'Look at all we are doing.'"

Some have made claims, including mention on some credit union and financial industry blogs, that nearly three-out-of-every-four credit unions are currently under some sort of administrative action. But NCUA said such figures are a broad exageration. For instance, citing 2010 statistics from "The Safety and Soundness Report, "one source who requested anonymity claimed that in 2010 some 5,711 credit unions were operating under Documents of Resolution (DOR), with 252 operating under Letters of Understanding and Agreement (LUA), and 21 operating under Cease and Desist Orders (C&D). "That's over 70% of credit unions," the source claimed.

This same person indicated that the additional regulatory pressure will hurt credit union growth. "NCUA is over-reacting to the point where they are writing up credit unions for things they normally would not have in good times."

However, as NCUA has noted in the past, a DOR can often be a simple exam finding the examiner has noted and asked the credit union to address, and differs significantly from more prescriptive administrative action, such as an LUA. According to the latest NCUA numbers the actual stats are much more modest: 333 natural-person credit unions are under LUAs, 86 are under Preliminary Warning Letters, 28 are under C&Ds, and four are in conservatorship. DOR numbers were not available at press time, with NCUA offering to make them available through a Freedom of Information Act request.

Nevertheless, Hubert Hoosman, CEO of the $640-million Vantage CU in St. Louis, also sees the increased activity and termed it a "CYA. I believe 60% to 70% of credit unions are operating under an LUA or DOR, and to me that is ridiculous. I think NCUA has taken such a conservative approach over the last year and a half to prove their value as an independent agency and have hampered the ability of credit unions to serve existing members and expand field of membership."

Another source, asking for anonymity, stated that the extra pressure is putting CUs in "neutral at a time when we should be moving forward."

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