NCUA Board Vice Chairman Rick Metsger told attendees at the Education Credit Union Council's Annual Conference Monday the federal charter has been devalued and it needs to be addressed by the agency.
“While the regulator is bound by statute on many charter issues, other issues can be changed because they are a product of agency interpretation, not statutory mandate. Change is particularly appropriate when those interpretations are dated and no longer represent the current financial marketplace,” Metsger told conference attendees.
In the past, Metsger said the key test of underserved areas was how many brick and mortar offices were located in a given geographic area.
“Mobile banking challenges that assumption as do evolving definitions of rural areas and well defined community,” he said. “What made sense several decades ago no longer makes sense in a more complex and interconnected world. The federal charter has become devalued and this devaluation needs to be addressed and addressed thoughtfully and carefully.”
While the overall number of charter changes has decreased in the past few years, Metsger noted that the pendulum is tilting heavily from federal to state charters at almost a three-to-one pace over the last four years. According to Metsger, conversations ran two-to-one in the other direction over a similar four-year time period a decade ago.
“The dual chartering system works most effectively when both state and federal policies keep pace with changes in the financial marketplace, equalize competitive challenges, and streamline regulatory compliance,” Metsger said.
Many states are advancing their state charters on a biennial basis and thus, widening the disparity between who federal and state credit unions in the same market can serve and what they can offer consumers, he added.
Some of the conference's attendees said that their credit unions were cautiously considering expanding into private student loans. Metsger said recent data showed private student lending among the nation's credit unions has increased significantly on a percentage basis but overall, it represents a small portion of total loans outstanding.
“Education is the great equalizer in our society. Our nation must focus on how to restrain the ever-rising cost of education so that grants and loans to students serve their purpose of making access to higher education a reality and not a pathway to indebtedness,” Metsger said.
Excessive student debt will also make it more difficult for the next generation to buy cars or achieve the American Dream of home ownership, he noted.
“This could have significant long-term impact on both families and credit unions and other financial intermediaries,” Metsger said.
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