Voluntary Prepay Plan Comes Up Short, Is Canned
ALEXANDRIA, Va.-NCUA last week said it failed to obtain the self-imposed minimum commitments of $500 million for its voluntary prepaid corporate assessments plan, and therefore had canceled the program.
The failure of the voluntary program means credit unions will face higher assessments for the corporate program later this year. NCUA said earlier the voluntary payments could reduce this year's expected corporate assessments from around 25 basis points to as low as 15.
NCUA said it only received $370 million in commitments to the voluntary payments from 779 credit unions.
Under the program, CUs were invited to make voluntary, no-interest payments to NCUA to help defray the long-term costs of the corporate program, which would be applied to their future corporate assessments.
The NCUA Board had determined that the program would not go forward if less than $500 million in pledges were received. Therefore, NCUA will not debit any voluntarily pledged amount from any credit union. "NCUA responded to credit union requests and created a viable alternative to offer prepayments as a way to manage assessments in the long run," said NCUA Chairman Debbie Matz. "While the pledges fell short of meeting the required threshold to move forward, the NCUA Board remains open, perhaps, to reconsidering this issue next year."
In response, CUNA CEO Bill Cheney issued a statement saying, "It's unfortunate that the minimum size of the program could not have been larger, as CUNA had recommended, so that the prepayment would have provided for a greater decrease in this year's assessment. For example, had the minimum size been set at $1 billion, this year's assessment could have been reduced to about 12 BPs.
Had that been the case, and combined with CUNA's proposal that NCUA pay interest on the prepayments made, credit unions may well have found that the program would be more attractive, in which case they might have committed substantially more to the program."
NAFCU President Fred Becker, meanwhile, offered, "Since...it now appears NCUA will abandon the program, we believe NCUA must return to the drawing board to minimize the cost to the industry. To this end, we will continue to advocate tirelessly so that credit unions pay the least amount possible."