Where the new NCUA board should focus first

For the first time since 2016, the NCUA boasts a full, three-member board of directors following the confirmation of new board members Rodney Hood and Todd Harper. It has been a long time coming to fill the vacancies on the board, but with Hood's and Harper's NCUA experience, they should be able to hit the ground running.

The board has not stood still though. Over the last three years, it has led on a host of regulatory relief measures and now stands to affirm its role as a strong, independent regulator for credit unions. Under Chairman J. Mark McWatters, for instance, the NCUA made gains through the conception of the Regulatory Reform Task Force, which has given credit unions a platform to express and prioritize their pain points and need for regulatory relief.

As the credit union industry's Washington Watchdog, NAFCU is committed to continued engagement with the board as we advocate for more relief to help credit unions grow, create additional jobs, better serve their 115 million members, and boost our nation’s economy. To jumpstart the conversation, here are just a few items we think would be worth taking a look at this year.

1. Expand payday alternative loan options

Last year, the NCUA proposed new rulemaking on payday alternative loans (PALs), which would allow credit unions to offer their members short-term loans with higher loan amounts, longer loan terms and less strict membership requirements than previously permitted under the program. We appreciate the NCUA's proactive approach toward strengthening an important lending option for credit union members, but there may be room here for the board to conduct additional review. If these programs were flexible, credit unions could develop PAL options that best fit their members' individual needs. Overall, we support further changes that allow for different fee structures, loan features, maturities and loan amounts.

Needless to say, the NCUA’s proposal is a strong first step. NAFCU is also working with the Consumer Financial Protection Bureau to make sure all PAL programs are exempt under the agency’s payday rule.

2. More flexible loan maturity limits

Extending the current 15-year maturity limit on loans not considered a borrowers’ primary residence will require a legislative fix. But if the NCUA supports congressional action, we believe it could get the attention it needs. This is so important because – for members of the military who may be primarily based overseas or a member purchasing a second, less-expensive home to retire to – the current law prohibits credit unions from providing loans with terms over 15 years, thereby making the home less affordable. More so, the 15-year limit is not on par with that of other marketplace lenders, which puts credit unions at a competitive disadvantage.

To help provide remedy, NAFCU brought this issue to the attention of Reps. Lee Zeldin, R-N.Y., and Vicente Gonzalez, D-Texas, and, in response, they introduced a bill (H.R. 1661) that would give the NCUA greater flexibility in setting maturity limits.

NAFCU also supports changes to the requirements to qualify for the current 40-year maturity limit on long-term residential real estate loans where the one-to-four family home is the principal residence of the borrower as well as an expansion to the current 20-year maturity limit for covered home improvement, mobile home, and second mortgage loans.

3. Increase access to alternative capital

In an effort to help low-income designated credit unions access capital faster, we support changing the secondary capital plan approval process and streamlining the application process. As it pertains to additional powers, we find value in the opportunity for credit unions to raise capital to strengthen their capital buffers and to be permitted to count certain forms of supplemental capital towards their net worth ratio calculation to alleviate current constraints on building net worth.

The NCUA has approached this issue in a thoughtful and comprehensive fashion, and we see opportunity for the new board to look into this further.

Although these are just a few of the items on our radar this year, we are still focused on other, more controversial issues, including third-party vendor authority and risk-based capital. We also look forward to thoughtful conversations ahead on these issues as well.

The NCUA board's stated mission is to “provide through regulation and supervision, a safe and sound credit union system, which promotes confidence in the national system of cooperative credit.” And it is our promise, alongside our members, to roll up our sleeves and help advance the credit union industry.