ALEXANDRIA, Va.—The NCUA board is set to meet today when it is expected to finalize a rule to make its 2016 field of membership rule consistent with last year's decision from the U.S. Court of Appeals for the D.C. Circuit in the lawsuit brought by the American Bankers Association (ABA).
Separately, NCUA Chairman Rodney Hood also delivered virtual remarks to a credit union conference during which he addressed where he believes credit unions can “rise to the occasion.”
During today’s meeting, the board is also expected to propose a rule to transition credit unions to the current expected credit loss (CECL) standard.
As CUToday.info reported, the D.C. Court of Appeals ruled largely in favor of the NCUA in the ABA lawsuit in August 2019 and sought additional explanation of the NCUA's decision to eliminate the urban-core requirement for local communities based on core based statistical areas. Putting an end to the litigation, the U.S. Supreme Court earlier this month declined ABA's petition to hear the lawsuit after the appeals court declined to rehear the case en banc.
What Rule Would Do
To address the appeals court's concerns, as CUToday.info also reported, in October 2019 NCUA proposed a rule that would:
- Re-adopt a provision to allow an applicant to designate a combined statistical area (CSA), or an individual, contiguous portion CSA, as a well-defined local community, provided that the chosen area has a population of 2.5 million or less
- Provide further explanation and support for eliminating the urban-core requirement for local communities based on CBSAs, as provided for in the 2016 FOM rule
- Provide express authority for the NCUA to reject a credit union application for CSAs and CBSAs if the agency determines that the FOM selection reflects discrimination (the ABA had argued that the 2016 rule would allow credit unions to engage in redlining; this addresses that concern)
The board meeting is slated to begin at 10 a.m. ET and will be livestreamed on NCUA's website. CUToday.info will provide complete coverage.
Hood Delivers Remarks
Seperately, Chairman Rodney Hood told credit unions they have an opportunity to rise to the occasion when it comes to their response to both the coronavirus and the issue of diversity, equity and inclusion.
“For credit unions, in particular, these events have taken on added significance because they highlight inequities that have long existed within the communities they serve throughout the United States,” Hood said in remarks delivered virtually to the Credit Union Leadership Convention. “The industry’s mantra of people helping people can also serve as a useful moral guidepost for how we can transform today’s challenges into an opportunity for understanding, inclusion and healing.”
Other Points Made
Among the other comments made by Hood:
- State of CU System. Hood said that while there is evidence of an economic recovery from the pandemic, the agency anticipates CUs will experience higher delinquency rates. “The near-term economic outlook is somewhat challenging, and I encourage credit unions to monitor economic and financial developments,” he said. “Though the months ahead will undoubtedly challenge the credit union system in unprecedented ways, it’s important to remember that credit unions have historically played a vital role in helping their members — and by extension, their communities — succeed financially.”
- CECL. “Even before the current pandemic, credit unions had approached the NCUA with concerns about the unintended consequences of implementing the new accounting standard,” Hood said. “In our current environment, I am especially concerned that adopting CECL will have a chilling effect on lending, including loans to low-income borrowers.” Hood said he has continued to urge FASB to grant credit unions a permanent exemption from CECL, and added the NCUA board has the authority to provide some relief to credit unions to minimize the standards effects.
- DEI. “Unfortunately, organizations and executive leaders far too often treat diversity as simply a ‘human resources’ issue,” Hood noted. “To be truly effective, though, diversity requires a commitment to cultural change at every level and must extend throughout the organization. It cannot simply be a matter of “checking the boxes” to show that you’ve got the right proportional representation of women, people of color, and LGBTQ+ people in the C-suite or on a corporate board.”
More on DEI
In expanded remarks on the issue of DEI, Hood called on credit union leaders to consider diversity in broader terms and challenged them to make an authentic and sustained commitment to financial inclusion.
Specifically, Hood said leaders should ask:
- Are we doing everything we can to reach people with low and moderate incomes?
- Are we including disabled and differently abled individuals in our financial inclusion plans?
- What about people in hard-pressed urban communities or in distressed rural communities where financial service options are increasingly limited?
“Each of us should be thinking critically about these and other questions because they are at the core of true financial inclusion,” Hood said. “The financial services industry has shown great creativity in developing new types of products, but we haven’t always directed those creative energies toward the people and communities who need help the most. And that’s important because what truly matters is the impact we’re having on real people.”