Matz to Home-Based CUs: Drop Dead

April 7, 2014 at 7:49 am 2 comments

With the tone of a parent anxious to get their free-loading college graduate to get his own place, Chairman Matz proclaimed Friday in an interview with CU Times that the days of the erstwhile home-based credit union are over.  Not withstanding the fact that the regulation requiring existing home based credit unions to find office space within two years is still pending, Matz told CU Times that as credit unions grow “I don’t think there is any justification for having a financial institution in somebody’s house.  I really think those days are over.”

As for those of us who believe that home-based credit unions are an important part of credit union history, Chairman Matz said, basically, what’s your point?  She stole one of my favorite metaphors when she pointed out that even though the “buggy whip was useful in its time, it’s not useful anymore. . .”

A few quick thoughts:

  • Of all the issues for NCUA to get fired up about, why, why, why is the Chairman so fired up about home-based credit unions?  There are approximately 7 such credit unions in New York State and nationwide, they represent a miniscule fraction of the industry.  Does their continued existence seriously pose a threat to the safety and soundness of credit unions?  If so, the industry is in much worse shape than I thought.
  • Do home-based credit unions really pose a safety threat to examiners?  Of course not.  Unless there is an epidemic of people setting up home-based credit unions so they can prey on examiners, this argument strikes me as somewhat paranoid.  To the extent that examiners simply feel that someone’s home is not the proper place to be doing an audit, then simply pass a regulation giving examiners the authority to mandate that examinations take place outside the home, perhaps at NCUA headquarters or another credit union. 
  • Is history a good enough reason to keep these credit unions open?  You bet it is.  Chairman Matz misses the point.  If the vast majority of credit unions were still using the financial equivalent of the buggy whip, then this regulatory eviction would be long overdue.  But the vast majority of credit unions moved out of houses decades ago.  By allowing home-based credit unions to remain there, NCUA allows the industry to maintain one of the most important symbols of its unique structure and evolution.  I think it is great to be able to tell people that the cooperative structure is so simple that a group of neighbors, church members and family members can bank out of their homes if they so choose. 
  • Is there a legitimate safety and soundness concern?  Chairman Matz comes across as a tad heavy handed in dismissing the home-based credit union.  Ultimately, it’s not for her and her fellow board members to decide what office space best reflects the professionalism of the industry but whether home-based credit unions pose a risk to the beloved Share Insurance Fund.  To the extent individual credit unions, whether they are operating out of a cutting edge office park or Uncle Bob’s basement, are not conducting their business consistent with safety and soundness, then regulators have every right in the world to clamp down on their practices.  But to categorically say that an entire type of credit union should be done away with is an abuse of regulatory authority that all credit unions should be concerned about.  Besides, I think it’s great that there are still some credit unions out there whose employees can start their day in their bathrobes with a cup of coffee.  On that note, off to work.

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

Beware of Unlimited Operations Why Credit Unions Are Wrong On Risk-Based Capital

2 Comments Add your own

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


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.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 445 other followers

Archives