ALEXANDRIA, Va.–An interim final rule on overdraft proposed and supported by NCUA Chairman Rodney Hood has been tabled after his two fellow board members—one of whom called the process “sketchy”—expressed opposition.
Board members Todd Harper and J. Mark McWatters both raised a number of objections during the agency’s open board meeting Thursday, including asking why NCUA wasn’t following the Administrative Procedures Act and putting the proposal out for comment. Harper said the proposal would have amended one of the requirements that a federal credit union must adopt as a part of its written overdraft policy; specifically, it would have modified the requirement that an FCU’s written overdraft policy establish a time limit, not to exceed 45 calendar days, for a member to either deposit funds or obtain an approved loan from the FCU to cover each overdraft.
The interim final rule would have removed the 45-day limit and replaced it with a requirement that the written policy must establish a specific time limit that is both “reasonable and applicable to all members, for a member either to deposit funds or obtain an approved loan from the credit union to cover each overdraft.”
After staff presentations during the board meeting and ahead of comments by his fellow board members, Hood said the change would provide appropriate regulatory relief, especially during the coronavirus pandemic.
‘Sketchy’ Process
But Hood’s fellow board members didn’t agree.
Board Member Todd Harper said the proposal was being rolled out “under a sketchy regulatory process,” and that NCUA is missing an opportunity to provide credit union members with substantive relief during the pandemic with its overdraft proposal.
Harper said the economic slowdown is taking a disproportionate toll on low-income families, and that with 38.5-million Americans losing their jobs in just nine weeks, “the pain is real.”
“The statistics show we need to do more to protect households from this economic fallout by eliminating or capping fees or taking other consumer protection actions,” said Harper.
Harper said that “counter” to the way the proposal had been framed, it does “almost nothing” to help members, especially since the proposal would allow a credit union to charge off an unpaid overdraft but still attempt to collect it.
“It’s like having your cake and eating it, too,” said Harper, who also expressed opposition by noting the interim final rule up for a vote was not in accordance with the Administrative Procedures Act. “The kicker is this rule is that it does not sunset.”
Harper said credit unions are already earning billions of dollars in overdraft fees and that NCUA should have taken “bold action” to help all the families living paycheck to paycheck.
McWatters Response
In his response to the proposal, Board Member J. Mark McWatters said he was “disappointed” the overdraft policy rule was presented as an Interim Final Rule instead of as a Proposed Rule, with a 30-day comment period, under the Administrative Procedure Act.
“As I am not aware of any safety and soundness issue that will arise from our failure to immediately adopt the proposed overdraft rule, we cannot argue that exigent circumstances exist – as in the Prompt Corrective Action, or PCA, rules before us today – to justify the use of the Interim Final Rule,” said McWatters. “Further, I am not aware that meaningful constituencies of credit unions and credit union members have specifically requested the Board to consider this issue. That the banking agencies have already adopted a similar rule offers no justification for this agency to skirt the procedural safeguards afforded the public to comment on our regulatory action in a timely and transparent manner as prescribed under the Administrative Procedure Act. Absent those exigent circumstances, the agency should welcome and encourage a vigorous round of comments from all interested parties before declaring the rule as final. Receiving comments only after the rule becomes final is often of limited benefit. There is certainly a time and a place for the use of Interim Final Rules, but this is not one of them.”
Unable to get a second on the proposal to move it to a vote, Hood then tabled the item.
Hood: This Issue is 'Important'
Following the tabling of the item, Hood issued a statement saying, "While it is rare for an open Board meeting to include an item that does not pass, it does occasionally happen. If I only bring forth ideas to the board that we know we have the votes for, it does not allow for an honest, open, and full debate. I brought this issue forth because I believe it is important. And the public has a right to transparency on this matter.
“This interim final rule should be approved because the problem is now. The other board members disagreed. However, the Office of the General Counsel determined that today’s rule was appropriate as an interim final rule and did not violate the Administrative Procedure Act. Therefore, I reserve my right as Chairman to have the Board reconsider this rule if the public thinks this is important.”\
CUNA Response:
In response to the board decision, CUNA Chief Advocacy Officer Ryan Donovan said, “We’re disappointed that the NCUA Board was unable to move forward with the interim final rule, which would have allowed credit unions to extend the period before which they would charge off overdrafted accounts, helping some consumers affected by COVID-19 stay connected to their credit union. Whether we’re in a time of crisis or not, credit union members benefit when regulations are written with flexibility. This represents a missed opportunity.”