Fifty years ago, it was an entirely different setting for all of us. We had just endured, two years before, the assassination of President Kennedy. We were on the cusp of advanced involvement in Vietnam. The cultural change that was to be summarized as simply “the 60s” was building steam. The Voting Rights Act would become law, on the heels of the Civil Rights Act the year before – both enacted in response to racial injustice in the country, which was fomenting civil unrest in big cities and other locales.
And, in the midst of all of this, state credit union supervisors decided they needed a voice and a presence to promote the safety and soundness of state-chartered credit unions. So they banded together and formed NASCUS—the only organization dedicated to the defense and promotion of the state credit union charter and the autonomy of state credit union regulatory agencies.
It was a very different environment for the credit union movement, too. There were, back then, more than 22,000 credit unions nationwide—about half (48%, or about 10,600 or so) of those chartered by the states. Of course, these state credit unions were smaller (averaging just under $500,000 in assets with about 760 members per credit union). There were no desktop computers, let alone “smart phones” or even fax machines. If you wanted to distribute copies of documents, you most likely got a whiff of the mimeograph machine as it churned out pages imprinted with blue text.
So much has changed. Our universe of state-chartered credit unions is only 25% of what it was in 1965. But state credit unions today hold well over $550 billion in assets and count more than 48 million members.
Fewer, But Stronger
Our state credit unions may today be fewer in number, but they are as strong as they have ever been—if not more so.
And credit should be given to those visionaries among state regulators who, back in 1965, foresaw that they needed to collaborate and have a voice and presence if credit unions in their states were going to thrive. They dedicated themselves to work together to ensure a safe, sound system of state credit unions that would be competitive with the federal charter. “Competitive,” that is, with an eye toward fostering innovation.
By and large, their efforts (along with those who also strongly support the state charter—state credit union associations, as well as state credit union boards and CEOs) have been successful. Over the last 25 years, the percentage of state charters as a total of all CUs has been just about 40%. And the percentage has been showing signs of increasing the past three years or so.
The effort continues to ensure the state system thrives, of course. Evidence of that is the NASCUS position on the overhead transfer rate (OTR), the subject of a certain amount of interest lately in the credit union movement.
In our view, the OTR has become inequitable, favoring the federal credit union charter over those of the states by lowering FCU operating fees through the reallocation of a significant portion of the expense related to FCU supervision from direct FCU operating fees to the insurance fund, which is funded in part by state-chartered credit unions.
Lately, NASCUS has urged the NCUA to adopt meaningful transparency—through the process of “notice and comment”—to allow stakeholders to weigh in on the legal and policy determinations that shape NCUA’s expense allocation that makes up the annual OTR.
Significantly, NCUA has made a move in that direction. This past summer, Chairman Debbie Matz proclaimed that the NCUA Board would vote in January to seek public comment on the methodologies used for calculating the OTR, through a notice published in the Federal Register. This announcement followed the release in June of a legal analysis—sponsored by NASCUS —which concluded that the OTR is a rule subject to the Administrative Procedure Act (APA) notice and comment requirements—including publication in the Federal Register.
A Positive Development
Chairman Matz’ declaration is a positive development for state credit unions. But there is much more to be done on this issue. For example, when stakeholders have the opportunity early next year to comment on the OTR, NASCUS will be urging them to focus on the appropriate division between NCUA’s roles as regulator and insurer – the real issue at stake.
The OTR is a long-standing issue for NASCUS—and NASCUS is in it for the long haul, which is precisely the significance of reaching a half century of service to the state credit union system.
Sure, much has changed in the last 50 years but the commitment of NASCUS to the state system clearly has not changed at all.
It’s a commitment that carries NASCUS into the next 50 years of service.
Lucy Ito is president and CEO of the National Association of State Credit Union Supervisors.
