WASHINGTON—The Defense Credit Union Council is asking Rep. Andy Barr (R-KY), who recently introduced a de novo banking bill, to consider extending similar support to credit unions, particularly those looking to start new credit unions.
Barr, chairman of the House Financial Institutions and Monetary Policy Subcommittee, last week introduced H.R. 758, which would establish a three-year phase-in period for new banks to comply with federal capital standards and provide relief for de novos in rural communities, among other provisions designed to promote de novo formation.
“While your legislation addresses an important need, we urge you to consider extending similar support to credit unions, particularly those looking to start new (de novo) credit unions,” DCUC Chief Advocacy Officer Jason Stverak wrote in a letter to Barr. “The process of chartering a new credit union today is fraught with regulatory and operational challenges, making it nearly impossible for aspiring credit union founders to meet the needs of their communities. Since 2015, only a handful of new credit unions have been chartered, a concerning trend that underscores the significant hurdles we face.”
Stverak outlined that aspiring credit union founders encounter numerous challenges:
- Complex and Lengthy Approval Process: “The National Credit Union Administration requires a burdensome application process that can take years to navigate. Many potential organizers lack the time and resources to meet these requirements,” Stverak wrote.
- Capitalization Challenges: “Unlike banks, which can rely on external investors to raise initial capital, credit unions are limited to retained earnings for growth and must operate under strict net worth requirements. This makes it extremely difficult for new credit unions to gain a foothold,” Stverak said.
- Lack of Operational Support: “De novo credit unions often lack access to technical assistance and operational resources, such as expertise in compliance, technology, and marketing,” Stverak wrote.
- Regulatory and Compliance Burdens: “The complexity of meeting compliance requirements under the Bank Secrecy Act (BSA), Anti-Money Laundering (AML) rules, and other regulatory obligations is particularly daunting for small and emerging credit unions,” Stverak said.
- Restrictive Field of Membership Rules: “Credit unions must navigate stringent field of membership requirements, which limit their ability to serve broader communities,” Stverak added.
“We respectfully ask for your support in introducing complementary legislation to your de novo bank bill that would address these challenges for credit unions. By creating a more favorable environment for starting new credit unions, Congress can empower communities to establish financial institutions that are not only mission-driven but also better aligned with the unique needs of their members,” Stverak concluded.