Credit Unions: Homeless for the Holiday

December 13, 2013 at 8:39 am 1 comment

Just in time for the holidays NCUA used its last meeting of the year to propose a regulation mandating that within two years no federally chartered credit union can operate out of a house or apartment. A second part of the proposal would give examiners explicit authority to schedule meetings outside of residences such as NCUA’s regional local offices. As part of the 30 day comment period for the proposal, NCUA is also asking if this ground breaking initiative should be applied to state chartered credit unions, as well.

Our good friends at the NCUA are offering two reasons for mandating that the estimated 95 federally insured credit unions that operate out of homes go find an office from which they can do their work. One has to do with safety, the other with soundness.

Most importantly, NCUA argues that meeting people in their homes poses a potential safety risk to examiners. After all, all it takes is one rabid dog to ruin the examination. In fact, the newest board member, Rick Metsger, sounded as if his dream job would be as a member of President Bush’s National Security Council when he argued that they couldn’t wait for a safety issue to act in order to protect examiners (does anyone see the mushroom clouds yet?).

Listen, I am not trying to minimize the safety concerns of examiners but is there an epidemic of criminals running credit unions out of homes and apartments for nefarious purposes? There is an important point here. As demonstrated by a report by CBS News earlier this year the home based credit union is in many ways as iconic to the credit union as the garage is to Silicon Valley. No doubt these institutions are vestiges of a bygone era slated for extinction, but they also represent the credit union movement at its best.

It’s a good thing NCUA doesn’t run the Environmental Protection Agency. If it did it would simply get rid of every animal on the endangered species list and get it over with.

Three cheers to Board Member Fryzel for voting against this regulation. He suggested that NCUA lacked the authority to promulgate this rule. He might have a point, but I doubt the institutions directly impacted have the time, money or resources to bring a lawsuit. Besides who has the time when there is laundry to be picked up and dinner to be made.

Not all the proposed regulations released yesterday bordered on the ludicrous. The Federal Reserve Board released a new version of a proposal to incentivize institutions that don’t accept check returns electronically to do so or get less legal protection against bounced drafts. I’ll have more on this proposal in the future, but considering how check negotiation is the core operational concern of all financial institutions regardless of their size or charter type I would suggest taking a look at this proposal and making sure that you tell your regulators and association advocates if it would have any unforseen consequences for your credit union.

Entry filed under: General, Regulatory. Tags: , , .

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1 Comment Add your own

  • 1. Samira Rajan  |  December 14, 2013 at 9:35 am

    “It’s a good thing NCUA doesn’t run the Environmental Protection Agency. If it did it would simply get rid of every animal on the endangered species list and get it over with.”

    This is a great line! The almost total absence of new charters also demonstrates this mentality. Supporting and enabling a diverse financial institution industry with strong connections to the grassroots needs to be a higher priority.


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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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