From Farce to Menace

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By Camden R. Fine, President and CEO of ICBA

So here we go again. It’s yet another disturbing proposal from the National Credit Union Administration to bureaucratically finagle its way around Congress and federal law. Even as nearly one-third of Americans are already members of a credit union, it seems there’s almost nothing the NCUA still won’t try to further expand the market reach and special tax-exempt privileges of the credit unions it supervises.

Talk about your captive regulator! When credit unions say “jump,” the NCUA says, “how high?”

Last month the NCUA’s sweeping, 167-page proposal to hand federal credit unions virtually unlimited freedom to serve almost any person of any means anywhere rightly drew an avalanche of letters from infuriated community bankers. If adopted by the NCUA’s unelected three-member board, the proposal would impose comprehensive and substantive regulatory changes that would allow federal credit unions to cobble together ever larger, more disparate and more imaginative fields of membership.

While the Federal Credit Union Act clearly limits membership in community credit unions to serving individuals and organizations within a well-defined local community, for example, the proposal would recognize some entire congressional districts as local communities. Even more obviously absurd, one provision would allow community credit unions in seven states—Montana, Alaska, Delaware, North Dakota, South Dakota, Vermont and Wyoming—to serve their entire state.

Basically, all air-breathing mammals in the United States would qualify to be credit union members. The multiple provisions of the NCUA’s proposal would, in combination, essentially render any field of membership requirements a meaningless policy fig leaf, particularly for multi-common bond credit unions and community credit unions. As ICBA wrote to the NCUA, this proposal makes a mockery of both the plain language and the clear intent of the Federal Credit Union Act. If credit unions or their regulator want to eliminate the common bond requirement, those credit unions should be taxed like banks and be required to shoulder the same set of regulatory standards. Or, more simply, they should adopt a bank or thrift charter.

Certainly the NCUA’s obsessiveness in pushing against its regulatory limits has had almost no limits in years. In February, the NCUA dramatically expanded loopholes for member-business-lending rules for credit unions, a self-serving and imprudent policy change that only a few large bank-like credit unions could or would take advantage of. More perplexing, the NCUA is championing legislation to allow credit unions to raise investor capital, a maneuver that would jeopardize if not betray the very member-owned model for which the agency so enthusiastically cheerleads.

The NCUA’s unbounded regulatory mischief has gone from silly to absurd. It’s now bordering on reckless disregard for the red letter of the law.

So, yes, here we go again. But this time around it’s different. By flouting congressional authority, the tax-exempt credit union model intended to serve only people of modest means and limited constituencies is on the verge of becoming fraudulent.

Rest assured that ICBA will vigorously oppose this newest NCUA proposal as a major threat.


Reach Camden R. Fine at cam.fine@icba.org.