DENVER — The NCUA's opt-in process for low income credit union designation may expand to include state-chartered credit unions, NCUA Chairman Debbie Matz announced last week during her keynote speech at the 2012 NASCUS Summit. The agency hopes to put the program into play later this month by working with state regulators to identify eligible state-chartered credit unions and reduce the red tape required by the NCUA.
Matz said the NCUA will meet with NASCUS President/CEO Mary Martha Fortney to brainstorm ways to initiate an LICU opt-in approval process similar to the one NCUA launched for federal credit unions last month. The NCUA would like to verify eligible state-chartered credit unions each quarter, after state regulators provide the federal insurer with appropriate member income data. NCUA would then notify state regulators which credit unions are eligible; state regulators would complete the LICU eligibility designation process.
Fortney told Credit Union Times the program is still in the very early stages and will be subject to each state's low-income program rules. Some states don't have low-income designations, she added.
In August, the NCUA sent a letter to approximately 1,000 credit unions, notifying them of their LICU eligibility and offering them the chance to gain LICU designation by simply replying to the letter. To date, Matz said 553 credit unions have responded and accepted. The NCUA will send a second letter to eligible federal credit unions because Matz said some credit unions didn't receive the letter or haven't yet had a chance to meet with their boards to accept the offer.
Matz also announced that the NCUA will introduce a new regulatory relief package at its Sept. 20 board meeting.
The package will include a proposal to increase the definition of small credit unions above the current $10 million asset threshold. The move would exempt more credit unions from recent rules on interest rate risk and liquidity risk, Matz said, as well as qualify more for assistance from the agency's Office of Small Credit Union Initiatives. The NCUA board also plans propose expanding rural fields of membership during its September meeting. The move would allow credit unions that serve rural areas in large states to expand more easily.
Another proposal expected on the board agenda would allow credit unions to invest in the Treasury's Inflation-Protected Securities. That proposed rule came from this summer's listening sessions, Matz said.
Finally, the board will introduce an ANPR to collect comments on ways the NCUA can make its payday loan alternative program more attractive. Currently, Matz said, about 400 credit unions offer payday loan alternatives.
"I know these programs are expensive, but I know from working at a credit union that serves the military, it's an important service for some credit unions to provide," she said.
Matz said the NCUA will be evaluating various components of credit union payday lending, such as balancing fees charged to cover risk while protecting consumers.
"We would really like to know how we can make it a better program," she said.
Credit union service organizations anxiously awaiting the NCUA's final CUSO rule can breathe easy, as Matz announced that the rule has been put on the back burner for now. Due to unintended consequences, the NCUA has no immediate plans to release a final rule on the proposal that would subject CUSOs to NCUA reporting requirements.
Matz also announced two soon-to-be-released letters from the NCUA's General Counsel Office that will define two member business lending issues.
First, the general counsel will issue legal guidance on how credit unions can qualify for MBL restructuring blanket waivers, which would eliminate the need for personal guarantees from borrowers. The letter will define which loans would qualify for the blanket waiver under which circumstances, said Steve Bosack, Matz's chief policy adviser.
The general counsel's office will also release a letter that will expand the number of vehicles required to qualify as a business fleet, Matz said. Currently, only two vehicles qualify as a fleet.
"We're trying to make it a higher definition so more businesses can get credit union loans under this definition," Matz said.
During the question and answer session, Jim Blaine, president/CEO of the $25 billion State Employees' Credit Union, took Matz to task during a tense exchange about separate exams for North Carolina's state-chartered credit unions.
Jack Braswell, CEO of the $240 million Members Credit Union in Winston-Salem, N.C., opened the can of worms when he asked about an invitation the North Carolina Credit Union League had extended to Matz, asking to meet about the exams. Braswell asked Matz if she had received the invitation and if she would be willing to accept it.
Matz said she did receive the invitation and had replied, declining the offer. The NCUA has made clear what North Carolina state credit union regulator Jerrie Jay would have to do to end the duplicate exams, Matz said, and those requirements have not yet been met.
Blaine pressed the issue with a follow-up question, sarcastically introducing himself as representing one of the industry's "high-risk" large credit unions. Blaine asked why Matz was unwilling to meet with North Carolina league officials and others involved in the dispute and questioned the agency's response to other related issues, including the question of whether Jay leaked NCUA exam results to SECU.
"I'm not going to acknowledge your question with any comments or a response," Matz replied.
Blaine responded, saying, "Your unwillingness to listen … said something about the future of the dual chartering system."
"I've said everything I'm going to say on this matter," Matz replied.
The NCUA began conducting separate examinations of all state-chartered North Carolina credit unions in early 2012 after SECU released its state CAMEL ratings through a pilot program run by North Carolina credit union regulator Jerrie Jay. Jay violated the Federal Credit Union Act by allowing the release and, in turn, violated the trust the NCUA had in the state's effective regulation, Matz said in February.
So long as the pilot program continues in North Carolina, the separate exams will also. Blaine has said he does not plan to release his CAMEL ratings this year.
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