NCUA extends comment period for credit union-bank purchase proposal

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The National Credit Union Administration announced Monday that it had extended the comment deadline for the agency’s rule governing credit unions purchasing banks.

An NCUA release said the board voted unanimously on Friday to extend the March 30 deadline by 60 days. The agency first announced its decision in a midafternoon tweet the following day. The new deadline is May 29.

The agency did not give an explanation for the delay. Some industry groups have called on the regulator to do more to help credit unions attempting to respond to the coronavirus, including measures related to rulemaking.

When the regulator unveiled the long-awaited proposal in January, perhaps the biggest surprise was the lack of anything new. Rather, the agency’s rule consolidated much of its existing guidance into one place.

On Monday morning, before news of the extension had spread widely, the proposal’s page on the Federal Register said the NCUA had only received eight comments on the proposal, only four of which were available for public viewing. Three of those comments were from trade groups and just one was from an individual credit union. [Ed. A dozen comment letters were posted to the Federal Register by the end of the day.] One notable absence from those commenting was the Independent Community Bankers of America, which has been a vocal opponent of credit union acquisitions of banks. A representative from the lobbying group said it had not yet submitted a comment letter.

Those who had commented, however, have found plenty about the rule that can be improved.

One of the key objections raised was the lack of a firm timeline for the NCUA to consider these transaction. As currently written, the rule allows the agency to take each proposed acquisition as it comes in order to fully consider the implications of the deal. Several commenters pushed back on that, suggesting that the loose time frame could impede not only these purchases but broader credit union planning. A 60-day limit, many wrote, would not only be consistent with the Federal Deposit Insurance Corp.’s own guidelines, but maintain parity with other regulators — something some of the board’s newer members have said is a priority for them.

Ann Kosachev, director of regulatory affairs at the National Association of Federally-Insured Credit Unions, wrote in a comment letter that regulatory approval under the current structure can in some cases take as long as eight months.

“Without a regulatory deadline,” NAFCU wrote, “there is no guarantee that the approval of a credit union application to acquire a bank might not take longer, even extending beyond a year. To avoid any unnecessary delay or misguided denial of applications, the NCUA should provide a reasonable timeline for approval that also recognizes the need for some flexibility for credit unions to gather all necessary information to complete the transaction.”

The Credit Union National Association echoed that sentiment.

“We strongly disagree with the proposed approach to exclude a limit on the length of time the NCUA may take to consider a combination transaction,” CUNA wrote. “We urge the agency to adopt a specified timeframe, which is critical for planning purposes. Timing is of utmost importance in any manner of merger or other combination transaction, including those with non-credit union entities.”

One other frequently raised objection pertains to how bank customers become credit union members. Rather than require that bank customers affirm their membership, some commenters have suggested automatic membership with the option to opt out.

“To require the customers’ consent prior to finalizing a combination transaction may be problematic and cause unreasonable delays,” the Credit Union Association of the Dakotas wrote.

As written, that provision creates “an obstacle to membership and eliminates potential merger prospects,” wrote representatives from Chartway Federal Credit Union in Virginia.

The Michigan Credit Union League wrote: “The proposed requirement to obtain an affirmative act — whether an authoritative vote or individual consent — will be an extremely onerous task, creating a huge burden for applying credit unions. We ask the agency to strongly consider whether consent — in the form of an affirmative act or an opt-out — is necessary or appropriate for combination transactions with non-credit unions and would urge NCUA to eliminate this requirement entirely.”

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