Community Action Plan is repealed in long, heated NCUA Board meeting

ALEXANDRIA, Va.-A warm fuzzy holiday feeling was certainly not the atmosphere of the final NCUA Board meeting of 2001. While the board breezed through the first nine items on the agenda, the final item, the repeal of the Community Action Plan (CAP), proved to be a real sticking point. Of the four-hour long board meeting, nearly three hours were spent discussing the CAP. NCUA Board Member Yolanda Wheat, author of the CAP, cast the lone vote against repealing the unpopular regulation. She argued that repealing the CAP by approving an interim final rule, rather than going through the notice and comment process required by the Administrative Procedures Act (APA), would damage the integrity of the agency and possibly come back to bite proponents of the repeal. “All of the board members have had a chance to speak,” Wheat, the only lawyer on the three member panel said. “Only one of them feels the public has a right to speak.” Chairman of the NCUA Board Dennis Dollar countered, “I’m not afraid of a comment period. I just think we’ve had it.” He referred to when CAP was proposed and received 430 comment letters, 423 of which opposed the regulation. Additionally, he noted that former-NCUA Chairman Norm D’Amours had proposed similar regulations that received comment. For effect, Dollar brought up to the table 950 comment letters regarding CRA-like requirements on credit unions informally initiated by Senator Phil Gramm (R-Texas) at the time of D’Amours proposal. He added that just because a regulation is unpopular does not mean that it is a bad idea. However, in this instance, Dollar said there was no evidence that the regulation was necessary. Wheat said that nowhere in the APA does it say past comment is sufficient for a future rulemaking. She questioned, at length, during the board meeting with Office of General Counsel Attorney Mike McKenna, the legitimacy of the motion to repeal. In case after case, she cited that in very rare instances can the notice and comment procedures be disposed with, and certainly not for a policy shift within the agency. The CAP would have required that federally chartered community credit unions, beginning December 31, 2001, have a plan explaining exactly how they planned to serve their entire field of membership. The reg was approved under a Democratic administration with a Democratic chairman. President George W. Bush appointed Dollar, a fellow Republican, chairman and thus created a policy shift. The Board Action Memorandum repealing the CAP sets forth several “good cause” reasons for the action, which the Office of General Counsel felt is sufficient to sustain the procedures taken to repeal CAP. These reasons include: * removing burdensome regulation; * recent and sudden increase in credit union asset growth; * uncertainty of the national economy; * saving the credit union community compliance expenses; and * promoting efficient use of agency staff and resources. “Accordingly, for good cause, the Board finds that.notice and public procedures are impracticable, unnecessary, and contrary to public interest; and .the rule shall be effective immediately and without 30 days advance notice of publication,” the regulation reads. However, NCUA did encourage comment following the interim rule and noted its intent to revisit the issue as a final rule. Siding with the majority of the board, the credit union trade associations, which had been opposed to CAP from the start, felt NCUA’s Office of General Counsel had clear legal support for its decision. “Christmas has just arrived!” NAFCU President and CEO Fred Becker commented. As far as the legal questions raised by Wheat, Becker, a former Navy judge advocate general, admitted he had not studied up on the case law but added, “The Office of General Counsel said it is within NCUA’s powers. I’d just assume it is correct.” “This provision was unjustified, as there has been no evidence that community credit unions have failed to fulfill their responsibility to serve the entire community,” CUNA President and CEO Dan Mica said. “Further, the NCUA Board acted prudently in making this change via an interim final rule, and seeking additional public comment before taking final action.” He noted that one of CUNA’s Renaissance Commission recommendations is to ensure the regulator focuses “only on those activities that are materially unsafe and unsound.” As far as a court’s view of the procedure followed in passing the interim final rule without public notice or comment, CUNA General Counsel Eric Richard said, “I think it’s clear that this is the right way to go.” He pointed out that the “burden is on the government to show a rational basis” for the regulation, which he felt was invalid to begin with. He added that it all boils down to an honest difference of opinion on the interpretation of the APA. Additionally, Mary Dunn, CUNA associate general counsel, explained that other agencies, such as the Internal Revenue Service, are notorious for promulgating rules without public comment. NCUA received a few dozen letters prior to its motion at the board meeting, most in favor of the repeal from members of Congress and credit union trade associations, but some from members of Congress stating strong opposition not only to its repeal, but also to the manner in which CAP is being repealed. The bankers are another group unhappy with the repeal of the CRA-like provision. “NCUA decided today it could not accept even the barest minimum of responsibility for ensuring that credit unions lend in their communities. The agency’s action – done without opportunity for comment – is both appalling and irresponsible, American Bankers Association Executive Vice President Donald G. Ogilvie said. He referred to NCUA as “chief cheerleader” for the credit unions rather than chief regulator. Other items on the NCUA Board agenda were fairly boiler plate including: * approval of community charter conversions for First Heritage, Apex, and Vandenberg Federal Credit Unions; * setting of the Community Development Revolving Loan Program interest rates at 1% and permitting applications year-round; * making technical amendments to several regulations; * issuing a request for comments on federal credit union employee benefits; * issuing a final rule permitting “guest” travel reimbursement for volunteers; *requesting comments on risk mitigation of non-maturity shares; * setting the operating level of the National Credit Union Share Insurance Fund at 1.3%; * approving NCUA’s Annual Performance Plan; and * approving the purchase of video conferencing equipment for not more than $235,000. Deleted from the itinerary, by a vote of 2-1 with NCUA Board Member Geoff Bacino voting against, was the replacement of NCUA’s telephone system. All other decisions were unanimous with the exception of the CAP, which passed 2-1 over Wheat’s objection. [email protected]