With plaudits to NCUA Board, now is time to "Pick up the Pace"

It is annual conference time here at NAFCU, a time for taking stock of where we are as a community and where we are headed. As credit union leaders convene in Orlando to discuss the important issues facing our institutions, we need to keep in perspective what is possible for us to accomplish in the near-term-and what may need to be tackled over the long-haul. I see credit union advocacy as a multi-lane highway. The fast lane is regulatory resolution of issues that might infringe on or unfairly limit the successful function of credit union goals and objectives. The other lane, which can be somewhat slower, is the legislative route. Not all issues must be solved through a trip to the Hill. Indeed, for many of our members, and with many issues, the legislative approach involves steep increases in time and risk that are unnecessary. With an NCUA Board that appears ready to place trust in credit unions and permit CUs to develop solutions that ensure both flexibility and safety, we need to be swift and decisive in moving items through regulatory review. For the first time in years, the credit union community feels empowered by the NCUA Board. Credit unions feel understood and valued. But we are also still in a honeymoon period with Acting Chairman Dennis Dollar and newest Board member Geoff Bacino. Since January of this year, we have all felt rather comfortable; and comfort, unfortunately, can breed complacency. If you think credit unions will have unlimited time with a favorable board, just look to Capitol Hill and consider the recent reversal of control of the Senate. There is a lesson to be learned for all of us. No, I do not believe some catastrophic restructuring of the NCUA Board lies ahead, nor does anyone here at NAFCU feel the Board is resting on its laurels. We must remember, however, that while we may be fortunate enough to maintain the current makeup of the board for years to come, we have no guarantees. NAFCU has been approached by a number of its member credit unions with laundry lists of issues they would like NAFCU to address from a regulatory standpoint, and they urge speed. We agree-we should pick up the pace. With the current makeup of the NCUA Board, there is no reason to believe we cannot accomplish a great deal by year-end: First, NCUA should protect and pass RegFlex. The concept of regulatory flexibility is the seminal step toward ushering in a new era between credit unions and their primary regulator-one where performance is rewarded and where, perhaps more importantly, NCUA is free to focus its time and resources where they are most needed. Reg-Flex stands to be Chairman Dollar’s undisputed legacy, and it is important that it pass intact, and swiftly. Second, NCUA must expand credit unions’ right to discretion on service selection by offering regulatory self-tests based on clear and fair definitions. Passing the incidental powers regulation currently pending before the Board will allow credit unions to better achieve their chartered missions by letting them add appropriate and useful services to their cooperative’s repertoire without returning to NCUA for approval at each instance. Third, NCUA should implement the flexible examination plan currently being considered by the Board. Credit unions performing at peak health ought be allowed a less administratively disruptive 18-month examination cycle, rather than the current yearly exams. Provided safety and soundness concerns are met, no one is served by over-examination of CUs-it is poor use of both time and resources for NCUA as well as credit unions. Fourth, NCUA should take its cue from other government agencies when determining whether credit unions requesting community charters have met the “local community” requirement. In its field of membership rule, NCUA has included a restrictive presumption-favoring a single political jurisdiction with a population of 300,000 or multiple political jurisdictions with a total population of 200,000-that puts credit unions not fitting these criteria through an arduous process to test if the local community requirement has been met. NCUA should look to other agencies’ regulations, which have interpreted communities more broadly, and recognize that “local community” may very well include larger populations than the current presumption recognizes. Fifth, NCUA should expand its interpretation of field-of-membership to better reflect the spirit of its use in H.R. 1151. A “first strike” in this direction should add association based on trade, industry, or profession to NCUA’s operational definition of common bond. Congress was clear in its acceptance of related work experiences or common interests as passing the test, thus credit unions are entitled to this flexibility in field-of-membership definition. Sixth, NCUA must augment its interpretation of the Federal Credit Union Act’s (FCUA) requirements for multiple common bond credit unions to include less stringent standards of proximity. In asking that groups being added to a credit union’s field of membership be in “reasonable proximity” to the group originally served by the credit union, NCUA is clearly in line with the spirit of FCUA. NCUA has unnecessarily restricted the requirement, however, by adding that proximity must include geographical closeness to a “service facility,” which they have narrowly defined to exclude electronic services and many shared branches. NCUA then applies these standards to all group expansions rather than solely those involving underserved populations. Given that ATM, shared facility, and e-banking services make up a huge percentage of many of our member credit unions’ transactions, NCUA is wise to consider whether a population requires in-person service delivery before indicating it as a requirement that, if not met, would disallow that population from accessing the credit union’s services in any fashion. NAFCU does not ask that NCUA overstep its position as a regulator and usurp the role of Congress. It seems, however, that in the 21st century financial environment the credit union community is right to ask the NCUA Board to solidly define, and vigorously protect, each of the rights with which credit unions have been endowed by Congress. Addressing the above actions, as well as the resolution of such issues as exception authority and voluntary merger exception, will go a long way towards doing so. It is not a question of pleading with our regulator to squeeze out every privilege possible from current legislation, but rather a firm request to NCUA that they interpret Congress’ actions in cognizance with the law and allow credit unions to take full advantage of their operating mandates.