Credit unions must prepare for demographic shifts: NCUA's Hood

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Credit union charter expansions could help the underserved gain access to mainstream banking services, according to Rodney Hood, the National Credit Union Administration chairman.

Hood previously signaled an interest in having credit unions reach more consumers. During his confirmation hearing, he said he wanted to expand access to affordable financial services for consumers in rural communities.

But this desire could draw the ire of bankers. Credit unions extending their reach through expanded charters and fields of membership has been a lightning rod for attacks from banks over the years. For instance, the American Bankers Association sued NCUA over its expanded field of membership rules.

Hood discussed issues surrounding the underserved while taking questions from Lydia Mashburn, managing director of the Center for Monetary and Financial Alternatives at the Cato Institute, during an event on Wednesday. But he didn’t elaborate on specific mechanisms that credit unions could implement to reach minority communities.

“We cannot ignore the demographic shifts in the United States,” Hood said during a fireside chat at the Cato Summit on Financial Regulation. “In the next 22 years, America is going to be more minority than majority, and with that being said, I want to make sure there is an infrastructure for people who are minorities to be part of the economic mainstream.”

The U.S. Census Bureau projects that by 2045 Caucasians will make up 49.7% of the total population.

Hood also discussed regulation, noting that burdensome regulation can force a credit union to spend its resources on compliance maintenance rather than investing in products and services. NCUA reviews a third of its regulations every three years so that the agency can assess what is necessary and reduce regulatory burden.

However, Hood reiterated throughout the conversation that he would not sacrifice safety and soundness, and that he realizes that the industry needs guardrails.

“My regulatory approach is pretty simple ladies and gentlemen: Regulation needs to be effective, but not excessive,” Hood stated.

Congress is currently considering two different bills that would revamp anti-money-laundering compliance. Credit unions have long complained about the cost of meeting AML rules. Mashburn noted that some institutions avoid opening small-dollar accounts and originating small-dollar loans given the high costs to service those accounts because of compliance.

“While that doesn’t rest in my purview at NCUA, I do look at that issue in collaboration with some of the other financial regulatory agencies,” Hood said. “We need to look for other opportunities so that people can be engaged with small dollar lending.”

The fireside chat also hit on another hot button topic for credit unions: the industry’s tax-exempt status. An audience member asked Hood if he’d be willing to completely give up the credit union tax-exempt status in exchange for other benefits from Congress.

"Since I only can control the financial regulation of credit unions, I don't really talk about tax matters, or those issues," Hood responded.

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Licenses and charters Financial inclusion Community charters Field of membership Money laundering AML Growth strategies NCUA Cato Institute