ALEXANDRIA, Va.–NCUA Board Member Todd Harper has sent a letter to the leadership of the Senate Banking Committee offering recommendations for further legislative action.
Among the actions Harper is proposing Congress take to “both contain the pandemic’s economic impact on credit union members and the credit union system, and also protect consumers,” are:
Extend the Sunset of the CARES Act Central Liquidity Facility Enhancements
Harper told the committee the temporary changes and increased flexibilities made by Congress to the NCUA’s Central Liquidity Facility, or CLF, in the CARES Act, are very helpful.
“As the economic contraction continues, we can expect credit unions’ liquidity needs to rise. Those liquidity needs may spike after the current expiration date,” Harper wrote. “For that reason, I urge you to make the CLF provisions in the CARES Act permanent.”
As an alternative, Harper urged Congress to extend the CLF provisions by a minimum of one year, to Dec. 31, 2021.
Protect Economic Impact Payments from Garnishment
With 30-million Americans having filed for unemployment in the past six weeks and a new survey showing more than three-quarters of households have experienced a decline in income because of COVID-19, Harper noted the financial relief issued by the federal government to consumers helps pay their mortgage or rent and covers expenses for food, utilities, and medical care, but is not currently protected from garnishment.
“Financially stressed American consumers deserve much better,” Harper said. “That is why I urge you to provide legal certainty and to clarify that federal financial relief is safe from garnishment.”
Increase Funding for Community Development Revolving Loan Fund Emergency Grants
Harper said in the letter emergency grants provided through the NCUA’s Community Development Revolving Loan Fund are supporting the pressing needs of 2,605 low-income credit unions, that together offer responsible products and affordable services to 56.3 million members.
“The NCUA has experienced a strong demand for its COVID-19 emergency grants. Because demand already exceeds the amount of available funds for these emergency grants, I urge you to quickly appropriate at least $10 million more for CDRLF grants in 2020,” wrote Harper. “The additional funding would allow the NCUA to increase the size of its grants, award more grants, and facilitate the efforts of low-income credit unions to adjust their operations, preserve capital, better serve their members, and effectively respond to the many state stay-at home orders and social distancing mandates presently in place to fight the spread of COVID-19.”
Exempt All Member Business Loans from the Statutory Cap during the COVID-19 Emergency
Harper urged Congress to provide greater access to affordable credit for small businesses by exempting all federally insured credit union member business loans made from the start of the COVID-19 public health emergency through Dec. 31, 2020, from the statutory member business lending cap. R
“Relief from the business lending cap will help credit unions make more loans to the Main Street small businesses that they serve, and facilitate an economic recovery,” said Harper.
Permit All FCU Charter Types to Add Underserved Communities
Harper noted underserved communities have been hit “especially hard by COVID-19” an that as a result all federal credit union charter types should be able to add underserved areas to their field of membership.
“This statutory adjustment would allow single common-bond and community charters to add underserved areas to their field of membership as well,” Harper wrote. “That would provide more Americans in underserved communities access to safe financial products and services, and affordable credit.”
Provide NCUA with Vendor Authority
All three NCUA board members have recently reiterated their belief NCUA should have vendor authority over third parties, and Harper made the request in his letter, as well.
“Most credit unions rely on vendors to conduct important parts of their operations. Yet, as credit unions respond to COVID-19 issues, they have little time to address problems that may arise with those vendors,” said Harper. “Many also lack the resources required to fully conduct due diligence when adding new vendors to address COVID-19 needs.
“At present, the NCUA lacks the authority to supervise or oversee credit union third-party vendors, even though the Government Accountability Office and Financial Stability Oversight Council have long urged Congress to close this regulatory blind spot. I respectfully request that you provide the NCUA with this oversight authority now. In making this change, the NCUA would achieve parity with the federal banking agencies, which already have vendor oversight authority.”
Maintain Capital Standards
Harper told the Senate leadership that in response to the COVID-19 crisis, some have advocated for temporary reductions in the capital standards for federally insured credit unions.
“Although such statutory changes would provide regulatory relief in the short term, they could also lead to a false sense of security and prevent the agency from taking timelier actions to prevent losses,” Harper wrote. “Thus, reductions in capital standards could ultimately lead to greater losses for the Share Insurance Fund, which all surviving federally insured credit union members would need to pay. To protect taxpayers, I recommend that you refrain from taking any action on changing statutory capital levels at this time.”