WASHINGTON— The Independent Community Bankers of America is calling on the FDIC and NCUA to “immediately issue case-and-desist orders” to direct Navy Federal Credit Union “not to refer to itself as a bank.”
At issue is Navy FCU’s operation of Community Bank. As CUToday.info reported here, after winning the contract last year, Navy Federal Credit Union has officially started operating the Military Banking Facilities (MBF) overseas, better known as "Community Bank."
The MBFs are part of the Department of Defense (DoD) Overseas Military Banking Program. MBFs overseas will now be co-branded as "Community Bank, Operated by Navy Federal Credit Union.”
The $170.8-billion Navy Federal Credit Union is now operating 60 MBFs and 272 ATMs already in existence on designated DoD military installations in Europe and the Pacific.
The institutions are separate entities from Navy Federal. The bank deposits do not qualify for NCUSIF deposit insurance, and are being insured through private deposit insurer Excess Share Insurance (ESI).
NCUA Legal Guidance Cited
“Navy Federal Credit Union — the nation’s largest and most growth-oriented credit union — has announced it is calling its program to operate overseas military installations ‘Community Bank, Operated by Navy Federal Credit Union’,” ICBA President and CEO Rebeca Romero Rainey said in a statement. “The Federal Deposit Insurance Corp. and National Credit Union Administration should immediately issue cease-and-desist orders directing the $168 billion-asset institution not to refer to itself as a bank.
“Cease-and-desist orders from the FDIC and NCUA are in line with NCUA legal guidance that has determined that federal law does not explicitly permit insured credit unions to refer to themselves as banks or banking organizations,” Romero Rainey continued. “Although credit unions may like to present themselves as banks, federal agencies should ward off any attempts to conflate a bank with a credit union, which would likely result in confusion among servicemembers.”
Not Quite Bank, Not Quite Credit Union’
In her statement, Romero Rainey further cites allegations made by CNN related to alleged mortgage lending bias at CNN and further states the world’s largest credit union “appears to be trying to mask the fact that it is a global financial institution that does not pay taxes or meet the same level of regulatory standards as real community banks.
“It is not even clear whether this new breed of institution — not quite bank, not quite credit union — will be examined by the NCUA, be subject to federal fair lending laws, or provide federal insurance for military customer deposits,” Romero Rainey said in the statement.
Additional Claims
The ICBA president further suggested:
- “While credit unions have watered down the restrictions that Congress has imposed to justify their tax exemption, credit unions nevertheless differ from banks in at least two key respects: they remain exempt from taxation and the Community Reinvestment Act. This has become particularly relevant amid the rising wave of credit unions using their taxpayer-funded subsidies to purchase tax-paying community banks. If credit unions want to call themselves banks, they should switch charters — and pay taxes like real community banks.”
- “Meanwhile, with large credit unions now apparently insecure enough about their industry to pretend they’re community banks, Congress should use this opportunity to investigate the nation’s outdated credit union policies and whether the government should continue subsidizing acquisitions of real, local, taxpaying community banks.”
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