WASHINGTON — CUNA slammed NCUA over proposed requirements for contacts with federal credit unions — labeling the rule unnecessary, unjustified and driven largely by a desire for "examiner convenience."
In December, the NCUA board proposed to amend its regulations to require examinations and other contacts between NCUA staff and staff or officials of a federal credit union occur in an FCU's business offices or other public location.
The proposal also would require affected FCUs to maintain at least one method for members and NCUA staff to contact the credit union. Additionally, the proposal would require all FCUs to obtain and maintain a business office, not located on the premises of a private residence address, no later than two years following the effective date of a final rule.
The five-page letter, sent by Mary Dunn, CUNA's deputy general counsel and SVP on Thursday, was addressed to Gerard Poliquin, secretary of the NCUA board. Dunn said the letter was developed with "substantial guidance" from the CUNA Small Credit Union Committee and the CUNA Examination and Supervision Subcommittee.
The letter makes a number of strong statements, leading off with a headline declaring, "Rules Should Not Be Issued to Address Singular or Isolated Problems." CUNA also said, "Increasingly, the [NCUA] is developing regulations to address issues that should more appropriately, more effectively and more efficiently be dealt with on an individual credit union-problem basis. This is the case with the current proposal, which CUNA does not support as issued for comments."
Further, CUNA argued the proposed rule is "Not Justified on Safety and Soundness Grounds." While CUNA does "strongly support appropriate" member and examiner access, as well as safety and soundness for credit unions of all asset sizes, the letter states, "CUNA disagrees with the agency's assumption that problems among home-based credit unions are characteristic of all members of that group."
According to CUNA, small, home-based credit unions feel the proposal, particularly the requirement that all federal credit unions maintain an office that is not within a personal residence beginning two years after the rule is implemented, is "unjustified and punitive."
CUNA said its Economics Department has identified 81 FCUs that would be subject to the rule if adopted. The trade group states these credit unions collectively have less than $150 million in insured shares, or about 0.017% of total insured shares, which CUNA argues "does not support this rule on a safety and soundness basis, the primary rationale for any new NCUA regulation."
Ignoring History
The proposal "ignores" the unique history of CUs, the CUNA letter stated, noting many of today's strong credit unions were founded without formal offices. "Had this rule been in place in times past, the growth of these credit unions would have been unnecessarily impaired," CUNA said.
The harm of the proposal to the affected credit unions and their communities could be "irreparable," Dunn continued. "A home-based credit union may have no choice but to merge or shut down because it is having difficulty meeting members' needs, cannot provide complex services or is crushed by the ever-increasing regulatory burden; however, we oppose any regulation that directly would eliminate a class of credit unions regardless of their ability to meet safety and soundness regulatory and other requirements."
Examiner Convenience
The main impetus for the proposal "appears to be concerns for examiners' safety and convenience," the letter said. "However, the agency has not provided sufficient examples to demonstrate that its employees are not safe or are inordinately inconvenienced by entering a private residence for a few hours to review the records of a small credit union."
After noting many federal employees have to perform dangerous jobs, CUNA states: "If the location of a credit union presents hazards for NCUA staff — for any legitimate reason — than NCUA should address the issue directly with the credit union on an individual basis. NCUA has authority under the Federal Credit Union Act to address NCUA staff safety without imposing this proposal."
Monitoring Communications, Records Preservation
The proposed rule requires FCUs to maintain and monitor telephone numbers or electronic mail addresses, or both. While this requirement "sounds reasonable," CUNA asserts there should be some flexibility provided by way of exceptions, if the rule is adopted, including that member access through the U.S. mail should be an option.
NCUA is concerned that many home-based federal credit unions are storing records in areas where they are at risk for accidental destruction, such as in basements near water heater tanks, the letter notes. Also, the regulator feels member privacy could be at risk if records are stored where other residents of the household could access them.
Responds CUNA, "For these reasons, home-based credit unions should be subject to the same preservation and security of records requirements as other credit unions, and they are."
A professionally operated financial institution "should be able to operate from a residence as long as it meets legal and regulatory requirements," Dunn wrote in the letter. "Credit union leagues and NCUA's Office of Small Credit Union Initiatives (OSCUI) "can help facilitate this without requiring that credit unions move in order to operate out of commercial or nonresidential space."
