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A veteran credit union observer said President Trump’s firing of two NCUA board members creates an existential threat to credit unions that should cause them to immediately ensure they have a route to continue if independent federal oversight crumbles.
Chip Filson, a former NCUA administrator who has been around the credit union movement for nearly 50 years, said while many will be focused on the question of whether Trump exceeded the law in firing Todd Harper and Tanya Otsuka, those questions will take months to work out in the courts.
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In the meantime, he said many credit unions have a unique option. In about 10 states they can switch to a state charter and get private insurance. In some states, obtaining that option requires legislatures to amend laws; in others it can be done through an administrative decision.
“It is very important for the entire credit union system to increase their options, and do so right away,” he said. “This is a critical pivot point for the credit union system.”
Filson has been commenting on credit unions since he started his "Just a Member" blog in 2019 after retiring from Callahan & Co., the Washington, D.C., credit union company he co-founded in 1985 with two other former NCUA regulators. Filson was director of the NCUA’s Office of Programs from 1981 to 1985.
Filson noted that it was credit unions that pressured the government to move from a single administrator in 1977 to a three-person board with no more than two being from the same party.
“Credit unions wanted the board to be independent, answerable and protective,” he said.
While the NCUA Board has and can operate with just two members, it cannot operate with just one, Filson said. That means that mergers, bank purchases and appeals can’t go forward.
“The whole scope and authority of the NCUA is at best uncertain, or perhaps inoperable, which could create a real crisis of confidence in credit union land,” he said.
“It throws the whole public perception of safety and soundness into question,” if there is doubt about the authority the agency’s normal decision making," he said.
Filson said defending credit union independence isn’t a Democrat or Republican issue, but one requiring all those associated with credit unions to speak out now, including the board’s sole remaining member, Chair Kyle Hauptman.
“Hauptman also has a role to stand up for the agency. What he says next is critical,” Filson said.
At least one consumer group also raised objection to the firings.
Adam Rust, director of financial services for the Consumer Federation of America, said the National Credit Union Administration Act requires the NCUA’s board to have bipartisan leadership under a framework independent from political pressure.
“This is the latest in a string of actions by the Trump Administration to subvert the law and undermine financial regulators that keep Americans’ money safe,” Rust said. “Firing Harper and Otsuka compromises the ability of the NCUA to fulfill its obligation to serve the needs of 142 million individuals and small businesses who have entrusted credit unions with their hard-earned money. It puts people at risk when partisan politics takes precedence over common sense.”
Contact Jim DuPlessis at [email protected].
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Jim DuPlessis
Jim covers economic data trends emerging for credit unions, as well as branch news and dividends.
