Put CAP on the chopping block-where it belongs

Unless the NCUA Board acts this week, the agency’s controversial CAP provisions will go into full effect on December 31. By that date, existing federal community charter credit unions must have designed a “Community Action Plan” to describe how they plan to address the needs of the “underserved portions of their membership.” Trouble is, I don’t know what that is. Since November 27, 2000, requests for new community charters and community charter conversions have been required to include CAP information as part of their business and marketing plans or as a supplement. Federal credit unions with community charters-in addition to preparing this new set of paperwork-are now preparing for the first round of post-CAP examinations, wondering how they will be tested on these new requirements, and questioning how an NCUA examiner might be able to come into their community-based nonprofit and tell them they are not doing enough to serve their community. This week’s NCUA Board meeting will be the last chance to repeal CAP before it takes on its full powers, and the elimination of CAP will reportedly be on the agenda. I would urge the NCUA Board to do what is right for credit unions and repeal CAP before it expands its reach. Simply stated, CAP is wholly unnecessary. To echo Chairman Dollar’s comments when he presented his top 10 problems with CAP-before casting the lone “no” vote against the regulation-it fixes a problem that does not exist. Credit unions already serve their members well; they make every effort to reach out to all those in their fields of membership, and even CAP’s supporters agree that there is no indication of CUs failing to serve their communities. Indeed, there is no tangible evidence whatsoever showing that community credit unions are not already doing a superlative job of reaching out to their low income and underserved populations. On its surface, CAP is simply a requirement that new and converting community credit unions-and by year’s end, existing community CUs as well-document how they plan to market their products and services to their entire community. In reality, however, CAP is a burdensome, unnecessary piece of regulation that essentially asserts that CUs are unlikely to serve all potential members without being instructed to do so by NCUA. As such, CAP is a regulatory slap-in-the-face to a community whose sole purpose is not to make a profit but to serve their entire membership. Credit unions were created, and exist solely, as financial cooperatives that provide the services and products their members need and want. To imply, as CAP does, that these same credit unions will only make an effort to serve all those in their fields of membership if required by regulation to prepare and implement a plan for how they will do so is offensive. NAFCU has come to know the NCUA as a responsive, fair regulator, but our experience surrounding CAP was far different. In promulgating CAP, the NCUA Board dealt the credit union community a blow when it ignored the community’s overwhelming objections to the proposed rule. During its required comment period, IRPS 00-1 drew 449 comment letters, 423 of which opposed CAP. And the CU community was not the only place voices could be heard opposing CAP. Four key House members wrote to NCUA criticizing the proposal, and then-Senate Banking Committee Chairman Phil Gramm, R-Texas, issued a strongly worded attack on CAP, noting that the provision was a “misguided attempt by the regulator to legislate.” Then-Board Member Dollar felt obliged to vote against IRS 00-1 despite the very pro-credit union provisions that were otherwise contained in the final rule. NAFCU has been, and will continue to be, an outspoken supporter of expanding financial services into low-income and underserved communities-the fundamental principle supporters of CAP are trying to advance. CAP, however, is not the means to that end. NCUA data shows that, during the first eleven months of 2001, credit unions adopted 231 communities, up from 50 in 2000. These are not the actions of a community resistant to serving low-income members. Indeed, the very preamble of the CAP proposal acknowledged that CUs already serve their communities. As a result, the NCUA Board’s motivation in passing CAP remains very unclear even today. Finally, like every federal regulation, CAP is not only a rule but also an “open sesame” to future rule making. During his same “top 10″ presentation before voting on IRPS 00-1, then-Board Member Dollar said that, if passed, we could expect CAP to grow far beyond simply applying to community FCUs, “in the best tradition” of federal regulation. He was correct to note the risk we take in opening this issue up for regulation. Once we make CAP a requirement for maintaining, obtaining or converting to a federal community charter it is a short trip before all new credit unions and FOM expansions require a community action plan. NAFCU has a responsibility to voice the concerns of the credit union community, and the community has been loud and clear on this one. CAP must go. The ball is in NCUA’s court. Let’s repeal it now, so we don’t have to revisit this issue after the regulation has gone into full effect. The time is right!