WASHINGTON–NCUA Chairman J. Mark McWatters told Senate committee today Congress could bolster consumer access and better protect credit unions and members by making a number of legislative changes.
The hearing was focused on the implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155), which was enacted earlier this year.
Testifying before the Senate Committee on Banking, Housing, and Urban Affairs, McWatters said, “While the NCUA Board can provide federally insured credit unions with meaningful regulatory relief, Congressional action is required to provide additional flexibility in some areas. Congressional action can provide new avenues for growth without sacrificing the safety and soundness of the credit union system.”
Among the areas where McWatters said Congress could take action would be to to make changes to the Federal Credit Union Act to open up access for more underserved households to credit union membership.
The chairman noted, for example, the Federal Credit Union Act permits only federal credit unions with multiple common bond charters to add underserved areas to their fields of membership. Allowing all federal credit unions to add underserved areas would give more people access to federally insured financial institutions and would make more credit unions eligible for Community Development Financial Institutions Fund programs, McWatters told Congress.
McWatters also urged Congress to act to allow for the chartering of web-based communities and permitting credit unions to add people living in a census tract where current projections would indicate they qualify as low-income.
Where NCUA Lacks Authority
Meanwhile, McWatters also noted NCUA is the only federal financial institutions regulator that does not have authority to examine and supervise third-party vendors, an issue Congress should correct, he said.
Pointing to the rapid growth of technology in the financial sector and growing cybersecurity risks, McWatters said credit unions are increasingly using CUSOs and other third-party vendors to provide technology services.
He cited a 2015 Government Accountability Office report supported giving NCUA the authority to examine third-party vendors, and said, “To manage the systemic risk fintech poses to the credit union system, the NCUA needs vendor authority comparable to our Federal Financial Institutions Examination Council counterparts.
Other Issues Raised
McWatters told the Senate committee the agency has made progress in reducing regulatory burdens on credit unions and making itself more efficient, effective, transparent, and accountable.
Among the NCUA accomplishments cited by McWatters during his testimony:
- Created a Regulatory Reform Task Force that reviewed all its regulations and proposed a four-year, tiered regulatory relief plan that is well under way
- Proposed or adopted amendments to its capital rules to reflect the safety and soundness risks currently present in the credit union system
- Gave credit unions greater flexibility in their lending activities
- Extended examination cycles up to 18 months to reduce the agency’s presence in well-run credit unions
- Launched a program to expand use of technology in examinations, data collection, and reporting.
Regarding Reg Relief
In terms of how NCUA has implemented parts of the Economic Growth, Regulatory Relief, and Consumer Protection Act in ways that are having a “substantial impact” on credit unions, McWatters adi the agency has:
- Published a proposed 2019-2020 budget in the Federal Register; the agency is taking public comments and will hold a budget briefing
- Changed its member business lending rule has been changed to exempt loans fully secured by 1-to-4-family dwellings, regardless of the borrower’s occupancy status
- Modified appraisal requirements for certain rural real estate transactions.
McWatters also referenced what he described as the NCUA Board’s bipartisan process that produced these accomplishments.
“I wish to thank my Democratic colleague, Rick Metsger, for diligently working with me in a collegial and collaborative manner for over 28 months to accomplish our shared administrative and regulatory agenda,” he said.
For the full testimony, here are McWatters’ oraland written statements.
NASCUS Response
Following McWatters' testimony, NASCUS CEO Lucy Ito issued a statement saying, “We continue to support NCUA obtaining examination authority over technology service providers that provide services to federally insured credit unions. However, in states with existing vendor examination mechanisms in place, deference should be given to the state authority to supervise these vendors.
“As far back as 2001, NASCUS has supported limited NCUA authority over technology service providers, specifically," Ito continued. "Most recently in 2015, in view of growing cybersecurity concerns, NASCUS promulgated a public policy position, again, proscribing NCUA’s authority to technology service providers with the added proviso that NCUA defers to state examinations of these entities in those states that have authority,” continued Ito. “Indeed, state regulators already cooperate with each other and with NCUA when examining technology service providers. Addressing cybersecurity threats necessitates a collaborative state-federal effort.”