The Truth Hurts: NCUA Gun-Shy When It Comes To FOM Reform

January 9, 2015 at 9:10 am Leave a comment

NCUA Board member Rick Metsger wrote an article in the CU Times in which he lays out an impressive list of reforms to enhance the flexibility of the federal charter. He also criticizes NAFCU’s Carrie Hunt for suggesting in an article earlier this week that meaningful regulatory reforms are stymied “because of an assertion that we need a change in the Federal Credit Union Act. “

Now I’ve never had the good fortune of meeting Carrie and she certainly doesn’t need a New York based blogger whose caffeine hasn’t completely kicked in yet to come to her defense. But the exchange underscores an important point: NCUA is gun shy when it comes to using its existing regulatory powers to provide expanded fields of membership, particularly when it comes to community charters. Don’t take my word for it; take NCUA’s. NCUA proposed doing away with regulations permitting credit unions to explain in narrative form how an area should be treated as a Well Defined Local Community, notwithstanding the fact that the proposed service area might combine two distinct towns or counties. Instead NCUA adopted changes that limit WDLCs to: “a single political jurisdiction less than an entire State, or a defined portion of that single political jurisdiction; a statistical area limited to 2.5 million or less people, so designated by the Office of Management and Budget (OMB),”

If you can’t fit your community into areas predefined by the OMB you are out of luck.

At the time it proposed the change, NCUA explained in the preamble that:

Another problem related to NCUA determining that a multiple, contiguous political jurisdiction is a WDLC based on a narrative application is the risk of litigation. Because the narrative approach is inherently a subjective one, it is vulnerable to legal challenges. NCUA believes it would benefit all involved to eliminate the great expense, effort, and uncertainty associated with the narrative approach in favor of a simpler, more objective method.” (Chartering and Field of Membership for Federal Credit Unions, 74 FR 68722-01, 68723),

At the time the Bankers  were ferociously fighting a proposed expansion of a state charter’s field of membership. NCUA no doubt realized that it was in store for similar litigation if it relied on the narrative approach, so it took the easy way out. It limited its own discretion and now deprives federal charters of the ability to serve areas which don’t neatly conform to census data.

Credit unions are stuck in an antiquated regulatory and statutory framework. With the Internet, it is ridiculous to define communities purely in physical terms. Plus, with the demise of manufacturing jobs and this cutting edge technology called an ATM, there isn’t the same need for employee based credit unions. New York State took an important step for the state charter when Governor Cuomo signed legislation permitting state charters greater flexibility in designing fields of membership that reflect the needs of local communities. For example, a SEG based credit union comprised of a City’s library employees can now apply to serve the larger community. In his article, Board Member Metsger lists a bunch of ideas to enhance the flexibility of the federal charter. It’s likely that the better the idea, the more likely it is that NCUA will face the threat of litigation. So what?

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

The economy  continues to pick up steam. The Labor Department reports this morning that employers added 252,000 jobs in December. The WSJ is reporting that this was the strongest year of job growth in 15 years.  In addition, judging by these numbers on consumer spending released yesterday it appears that more and more consumers are feeling safe enough to climb out of the bunker and start spending money they don’t have again.  What would we do without consumer debt?

 

Entry filed under: Economy, General, New York State, Regulatory. Tags: , , , .

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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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