By Michael Fryzel
Financial regulators in Washington and across the country have responded to the COVID-19 pandemic and the impact it is having on our nation’s economy by acting responsibly and providing swift and helpful measures for the institutions under their jurisdiction. In an effort to protect and keep safe the institutions they regulate as well as those who use them for their financial transactions, they have lessened regulatory burdens and approved emergency guidelines.
The NCUA board has implemented numerous steps to not only lessen the burden on credit unions, but also to provide opportunities for them to help their members through the financial problems and stress they are experiencing.
NCUA has put in place offsite examinations, granted flexibility on holding annual meetings, eased requirements for joining the Central Liquidity Facility, raised the level required for appraisals, encouraged application for low-income credit union designations and granted member flexibility on payments and transfers. In addition, they have made numerous suggestions to the chairman of the Senate Banking Committee for legislative changes that would further help credit unions and their members.
All these measures and legislative suggestions have been put forward to maintain the health of credit unions while providing the greatest number of options to help their members. As additional time passes and the economic fallout from the pandemic becomes greater, NCUA may have to provide even more relief and help to those credit unions that may need it.
A Simple Change
On Thursday of last week NCUA announced that it would take action that will be of significant help to those credit unions that serve our armed forces. A very simple rule change will allow those credit unions serving members of the military to be designated low income credit unions (LICU).
Chairman Rodney Hood and board members J. Mark McWatters and Todd Harper have been encouraging credit unions that can meet the requirements for LICU designation to do so. The benefits are substantial: an exception from the statutory cap on member business lending, which expands access to capital for small businesses and helps credit unions diversify portfolios; eligibility for grants and low-income loans from the Community Development Revolving Fund; ability to accept non-member deposits from any sources, and authority to obtain supplemental capital.
There are certain criteria a credit union must meet to become an LICU, and NCUA has eliminated one big hurdle that had been preventing those serving the military from even applying. Previously, credit unions were not allowed to include all their members in the application regardless of where they are stationed. When overseas, military personnel are assigned a post office box designated as APOs (Armed Forces Post Office) or FPOs (Fleet Post Office). NCUA regulations did not previously allow these military post office box addresses of members to be included in the calculation for an LICU designation.
That has now change, and credit unions will now be able to count those military members as they seek the LICU designation.
In recent remarks, Anthony Hernandez, CEO of the Defense Credit Union Council, said, “The big benefit for military credit unions and their members is that a low-income designation provides them with advantages to serve more members and to serve the underserved in a greater capacity.”
This was an easy fix, and the leadership at NCUA has now righted a wrong and provided additional flexibility to the credit unions whose members deserve not only our thanks but our help and consideration.
Michael Fryzel is the former chairman of the National Credit Union Administration.