Warning On Call-Report Fines Draws Fire From Trade Groups, Economist

WASHINGTON — NCUA's warning that it could fine credit unions by as much as $1 million a day for filing late call reports is under more fire.

CUNA, NAFCU and an economist say they are concerned about the agency's letter, released earlier this month, in which NCUA stated that "late filings of quarterly Call Report and Profile data have become a serious problem."

CUNA says NCUA's letter is a clear case of "regulatory overreach" and NAFCU cited the fines as "extreme."

Meanwhile, Michael Moebs, economist and CEO at Moebs Services in Lake Bluff, Ill., said though he sees the fines as necessary, the larger issue is that call reports for all financial institutions — and the process for assembling them — needs improving.

The viewpoints follow several CU executives criticizing and supporting the agency's recent move.

"We understand the need for the agency to obtain information in a timely manner — but these penalties are just not necessary," said CUNA President Bill Cheney. "Education for credit unions, including being sure they are aware of their reporting requirements, should be the keys to addressing problems — not punitive charges. We're pushing back with NCUA about the imposition of this program."

Carrie Hunt, NAFCU SVP of government affairs and general counsel said the trade association supports timely filings.

"However, on their face, the maximum penalties NCUA is permitted to assess seem extreme. NAFCU will be seeking additional feedback from our members on issues they may be having with filing. NAFCU firmly believes that the NCUA should carefully consider each credit union's individual circumstances before assessing a penalty."

Moebs said the problem with late call report filings is an issue that stretches across financial sectors. He stressed the need for all call reports to be uniform, easier to assemble and more user-friendly. Then, he said, the number of late filings would decrease.

"Call reports need to be more empirical, expanded, have standards for reporting and require training to report," said Moebs. "They also should carry incentives for failing to complete them on time."

He said NCUA's move to fine is good, but should not be watered down with caveats to avoid the fine. Moebs pointed out NCUA's fine announcement came two days after the Office of Management and Budget, through the U.S. Treasury, issued a proposal to expand information on call reports for fee revenue and deposit information.

"Interestingly, NCUA was not included in OMB's proposal," said Moebs.

At the heart of the matter, according to Moebs, is general ledger systems have not kept pace with the need for information. "This is the fault of software companies as well as financial service executives not listening to the needs of CFOs, controllers, bookkeepers and IT managers."

Moebs pointed out government agencies "welcomed" the expansion of the time to report call report data starting in the fall of 2008. "This was to avoid timely reporting of troubled FIs — over 1,000 banks, thrifts, and credit unions have gone under in the past five years."

Call reports for all financial institutions in the past six years have gone from being reported within 30 days of the end of the quarter to 60 days, according to Moebs "This is unacceptable from a managing perspective."