Bulk of Comment Letters Oppose Private Insurance Disclosure Proposal Excesses

ALEXANDRIA, Va.-In the wake of the close of the comment period on NCUA’s proposed rule on disclosures in private insurance conversions, NCUA Chairman JoAnn Johnson is being forced to defend her “effective, not excessive” regulatory philosophy. The majority of the 88 comment letters NCUA received on the proposal were in opposition to the changes. Of the major credit unions trade associations, CUNA and NASCUS opposed the proposal, while NAFCU-which opposes private insurance as a primary insurance provider-was in support of the rule and requested a couple additional disclosure requirements. American Share Insurance, the nation’s last private deposit insurance provider, opposed the changes, which could impact their business. Rhode Island Senators Jack Reed (D) and Lincoln Chaffee (R) wanted the changes to avoid another Rhode Island Share and Deposit Indemnity Corporation. (See page 1 of the Oct. 6 issue of CU Times). Additionally, `Mr. Regulatory Relief’ himself, Senator Mike Crapo (R-Idaho), joined the Idaho Department of Finance and the Idaho Credit Union League in opposition to the proposal. He wrote a letter suggesting the NCUA Board “withdraw its proposal, and instead focus on eliminating outdated, duplicative, ineffective, or unduly burdensome regulations.” Idaho is home to 45 state chartered credit unions, 20 of which have private insurance. Crapo, who is working on financial services regulatory relief legislation in the Senate, stated that the Federal Deposit Insurance Corporation Improvement Act gave the Federal Trade Commission authority to oversee consumer protection disclosures for privately insured credit unions. “Congress did not give this responsibility to the NCUA because the NCUA is considered to be in competition with private insurance,” he wrote. As written, he said the proposed regulation would “infringe upon Idaho state law and impose burdens on state-chartered credit unions that are unneeded, unjustified and unfair.” Though the NCUA chairman was traveling last week, her special assistant and director of external affairs, Nick Owens, stated, “Chairman Johnson believes unequivocally that regulation should be effective, not excessive.” Credit union industry veteran, Callahan & Associates President Chip Filson wrote that, “By opting for private insurance, state chartered credit unions still have a real charter choice, that is, the option to operate under a single set of state rules.” He argued that the proposal would hurt the dual chartering system. As written, Filson said, the credit union CEO would not even be able to inform the board of a possible insurance conversion without prior NCUA approval because the board members are also credit union members. And the language NCUA has proposed for the disclosures already demonstrates the agency’s bias, he pointed out. Filson wrote, “The language has the unfortunate effect of encouraging a run on the credit union by the members.” In fact, the proposed language indicates that the government does not ensure depositors will get their money back if the institution converts to private insurance. However, Filson says, NCUA does not disclose that it would take an act of Congress for the federal government to back the National Credit Union Share Insurance Fund. “To disclose that the NCUSIF is backed by the full faith and credit without any further explanation is to present a half-truth to members and consumers. Certainly if full disclosure is imperative for private insurance, can anything less than full disclosure be the standard for NCUA itself?” he questioned. NCUA’s Owens said all comments would be taken under careful consideration. “The Board issued a proposed regulation and values the input received. Chairman Johnson believes there is not a regulation that has not been improved in some way through the comment process from those impacted by such regulations,” he said. “The agency will take the appropriate and deliberative time necessary to review and study all comments.” [email protected]