NCUA releases reg relief letter to Oxley; NAFCU, CUNA agree with choices

ALEXANDRIA, Va.-The NCUA Board released its key suggestions for regulatory relief contained in a letter to House Financial Services Chairman Mike Oxley (R-Ohio) last week. Oxley wrote letters to each of the federal financial institution regulators last month requesting recommendations for regulatory relief, which he is expected to parlay into a fast-moving piece of legislation by the end of the month. “From discussions with his staff, he is trying to put together a piece of legislation for quick action, hopefully by the end of this year,” Acting NCUA Chairman Dennis Dollar said. “We share your interest in seeking more efficiency in the way we conduct our regulatory responsibilities and likewise in the way the law and regulations require credit unions to conduct their business,” NCUA’s letter, signed by Dollar, read. “To this end the NCUA has been taking significant action on its own initiative to implement `regulatory relief’ where appropriate for America’s credit unions.” Dollar noted the agency’s efforts toward a more flexible examination schedule and his own regulatory flexibility, or RegFlex package. He pointed out that these changes could save the agency a great deal of time and money. NCUA’s primary suggestions included permitting a credit union to cash checks, wire money and offer money transfer services for all those eligible to be a member of that credit union. The agency advocated that this would help credit unions reach the “unbanked.” “Allowing FCUs (federal credit unions) to provide these limited services to anyone in their field of membership would provide a lower-fee alternative for these individuals and encourage them to trust conventional financial institutions,” according to the letter. NCUA also argued for eliminating the 12-year maturity limit on loans, which has a few exceptions like mortgages. The letter called the cap “outdated” and said that it “unnecessarily restricts FCU lending authority.” The agency suggested that it should set the maturity limits in accordance with safety and soundness. Currently, FCUs are also limited in the amount they can invest in a Credit Union Service Organization (CUSO). NCUA recommended that the 1% investment cap for FCUs in CUSOs should be eliminated from the statute and, instead, be regulated by NCUA. “The one percent aggregate investment limit is unrealistically low and forces credit unions to either bring services in-house, thus potentially increasing the risk to the credit union and the Insurance Fund, or turn to outside providers and lose control,” the letter read. Again, NCUA said it should govern how much FCUs can invest in CUSOs. Finally, removing the “reasonable proximity” requirement for multiple common bond credit unions was near the top of NCUA’s wish list. The agency argued that in today’s technological age, geographic bounds are unnecessary and that it is a great financial burden for an FCU that wants to add a group to build another entire facility in the new area. “I guess I’ve had this issue raised with me by credit unions more than any other over the past year, year and a half.” Dollar said. “This is a realization that we live in a `clicks and mortar age’ rather than a `bricks and mortar age.’ ” The agency also offered two alternative changes including expanded investment options and permitting voluntary mergers without first considering a “ spin-off” group. “These all are items I think are worthy of the consideration of Congress,” Dollar said. “This list.is a consensus list of the entire board,” Dollar emphasized. The board consulted with its General Counsel Office, the Office of Examination and Insurance, Public and Congressional Affairs, and the Investments Office. He added that they also took into consideration the letters from the trade associations. Many of the recommendations made by the NCUA Board to Chairman Oxley were also on the lists of suggestions previously given by both CUNA and NAFCU, including CSO investments and the 12-year maturity on loans. “NAFCU is extremely pleased with the package of legislative proposals that Chairman Dollar sent up to the chairman of the financial services committee, Chairman Oxley, last week. We believe that all of those items will further the goal that we all share to enhance the federal credit union charter and we strongly support each and everyone of those provisions,” NAFCU Senior Vice President and General Counsel Bill Donovan said. Nothing in the letter was a surprise to the credit union lobby groups, CUNA President and CEO Dan Mica said. “We had a pretty good idea of what everyone was looking at,” Mica explained. CUNA and NAFCU had convened a meeting of the National Credit Union Legislative and Regulatory Coordinating Council to discuss regulatory relief and each group had also spoken with members of the NCUA board as well. While member business lending is a hot topic on the minds of everyone in credit union land, NCUA felt that this was not the time to address the issue. “There’s no doubt that member business lending is an issue of great significance,” Dollar admitted. However, he added that commercial lending had been addressed just three years ago and proved to be controversial. Chairman Oxley asked only for technical amendments that would make life a little easier on the credit unions and not for suggestions of expanded powers. “We felt prospects of gaining some action there was quite limited.” Dollar pointed out that there is already a bill in Congress sponsored by Congressman Ed Royce (R-Calif.), which would expand credit unions commercial lending authorities. [email protected]