CUNA, NAFCU Support Bill to Make it Easier to Create New Credit Unions

CUNA sent a letter to Congress Wednesday supporting a bill that it hopes will clear unnecessary regulatory obstacles hindering the creation of entirely new credit unions and other financial institutions.

CUNA President/CEO Jim Nussle wrote to the House Financial Services Committee in support of the Promoting New and Diverse Depository Institutions Act (H.R. 4590). It would require the NCUA and other financial regulators to conduct a study to assess the challenges by prospective de novo financial institutions, and create a plan to increase these entirely new financial institutions while promoting safety and soundness.

“A challenge credit unions face in serving underserved and unbanked communities is the high regulatory burden to create new or de novo credit unions,” Nussle wrote.

NAFCU wrote to the committee, chaired by Rep. Maxine Waters, D-Calif., on May 21, noting its support of the measure then being drafted.

NCUA Board Members Rodney Hood and Kyle Hauptman spoke out in support of easing regulatory burdens to allow more new credit unions to be created in less time at CUNA’s annual Governmental Affairs Conference in March.

Nussle wrote that the number of de novo credit unions has fallen from an average of 7.7 per year before the Great Recession of 2007-2009 to an average of 2.2 per year since the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Dodd-Frank was a sweeping overhaul of regulations on banks, credit unions and other financial institutions enacted in response to the 2007 financial meltdown triggered by lax regulations of financial institutions, particularly asset-backed securities where the assets were bundles of high-interest, high-risk mortgages.

“Chartering a credit union is a time-consuming and complex endeavor — including identifying capital sources, determining field of membership, developing a business plan, appointing a board of directors,” Nussle wrote. “(The) NCUA offers consulting services at no cost once a preliminary field of membership is approved. But, it can still take three years, or even longer, to receive a charter.”

Since the start of 2019, the NCUA has chartered five de novo credit unions:

1. Community First Fund Federal Credit Union of Lancaster, Pa., was chartered in early July to serve the 550,000 people of Lancaster County, about 80 miles west of Philadelphia. It plans to open its office later this year.

2. Maun Federal Credit Union of Kendall Park, N.J., was chartered on April 26 to serve a local Islamic community.

3. Growing Oaks Federal Credit Union of Goldsby, Okla. ($1.5 million in assets, 29 members) was chartered Aug. 7, 2020, to serve four counties in the state.

4. Maine Harvest Federal Credit Union of Unity ($3.2 million in assets, 65 members) was charted Aug. 14, 2019, to serve the employees and 13,000 members of the Maine Organic Farmers and Gardeners Association and the Maine Farmland Trust.

5. Otoe-Missouria Federal Credit Union in Red Rock, Okla. ($1.6 million in assets, 386 members) was chartered in May 2019 to serve the 4,200 members and employees of the Otoe-Missouria Tribe as well as 17 tribal-owned businesses.