By Mark Begich and Ronaldo Hardy
Credit unions continually provide communities across the United States with safe and affordable options for financial products and services. The National Credit Union Administration plays an important role in overseeing this work by preserving the safety and soundness of credit unions from Louisiana to California to Alaska, and every state in between.
The NCUA has a clear mandate to regulate credit unions, and Congress has for years rejected certain NCUA officials’ pleas for an increase in power by expanding the agency’s authority to supervise and examine a broad group of so-called third-party vendors, including CUSOs.
In a struggling economy, consumers have leaned heavily on their credit unions for support and to help them through tumultuous times. High interest rates and an inflationary environment have presented challenges. On top of this, credit unions recently successfully weathered scares about any potential spread from the regional banking crisis. Credit unions have persevered through all of this and remain a strong and steady partner to consumers, under the jurisdiction of the NCUA.
A Pivotal Role
This pivotal role of credit unions in the U.S. economy is precisely one of the reasons why Congress should be skeptical of any attempts to pull focus away from NCUA’s core mandate of ensuring safe and sound operation environments, and lawmakers certainly should be concerned with new attempts at overreach that dilute its work.
Worse yet, Congress should be particularly wary of overreach by the NCUA that harms the work credit unions are doing with their partners to ensure consumers have the various resources they need.
The products and services offered by CUSOs are already highly regulated by agencies with issue area expertise for the products and services they are offering. Yet, the NCUA wants a piece of the pie, arguing that they should also supervise and examine these entities, duplicating existing work already being conducted by other agencies. They cite no compelling examples of a supposed pattern of threats coming from CUSOs or others that would be eliminated by their intervention.
Agency Lacks Expertise
The NCUA, which has focused on credit unions for more than 50 years, lacks the expertise to review this diverse group of stakeholders. If the agency’s authority was expanded, staffing up to meet these new responsibilities would be a long and costly endeavor. For example, credit unions can’t provide investment products, but CUSOs can. These products are subject to Securities Exchange Commission, Department of Labor, and FINRA regulations and examinations, and the NCUA has no reason to be familiar with them.
Adding an NCUA examiner to the process of a CUSO offering these products, could arguably do more harm than good – it would be the equivalent of asking a brain surgeon to supervise a knee replacement.
This is just one example of the plethora of unnecessary resource drains that would result by the proposed expansion. There is also no material benefit to consumers, and instead credit union members will pay the price figuratively and literally when new costs must be passed on.
Hundreds of Vendors
The average number of vendors for a single credit union can easily exceed 100, or 200 in the case of some larger credit unions. To be clear, these products and services are already in compliance with a host of consumer protection, privacy, tax, insurance, and other relevant laws and regulatory bodies.
If NCUA’s authority is expanded, it is likely that hundreds of new NCUA employees would be needed to review these thousands of credit union vendors doing business with nearly 4,800 credit unions nationwide. The NCUA already is facing challenges managing for the size and scope of the agency.
For example, while the number of full-time employees of the FDIC has decreased in response to the shrinking number of banks, the number of full-time employees of NCUA has increased, even as the number of federally insured credit unions has decreased from10,316 to 4,760 over the past 20 years. This is without even considering the training and different skill set that would be needed for the very different products offered by CUSOs and other entities the NCUA has its sights set on.
A Reasonable Assumption
NCUA is funded by assessments levied on the member-owned, not-for-profit cooperative credit unions it regulates and insures. Accordingly, it is reasonable to assume that the cost of any such expansion at NCUA will be borne by the credit union members themselves, who pay for the resources of NCUA.
This drain and misalignment of resources would be compounded by the simple fact that NCUA already has access to some of the information it is seeking new authority to gain. For example, NCUA could utilize its affiliation with the Federal Financial Institutions Examination Council to access information on technology providers regulated by the FDIC and Office of the Comptroller of the Currency (OCC).
Instead, NCUA wants consumers to pay for them to have more influence.
Not the Time to Take Eye Off the Ball
Over the years Congress has wisely withheld providing this requested additional authority from the NCUA. Credit unions provide their members with opportunities to own homes, drive a car, and a host of other life altering experiences.
NCUA plays a key role in protecting that ecosystem. This is not the time for NCUA to take their eye off the ball, or to introduce opaque and time-consuming resource burdens on those supporting the credit union movement.
The Hon. Mark Begich represented Alaska as a senator from 2009-15. Ronaldo Hardy is CEO of NACUSO.