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CUNA backs prepay concept but urges key changes
WASHINGTON (6/21/11)—Reaction from credit unions to the National Credit Union Administration’s (NCUA) voluntary corporate stabilization fund prepayment plan has been mixed, the Credit Union National Association (CUNA) noted in its June 20 comment letter, but CUNA endorsed the concept of prepaid assessments. The deadline for comments to the NCUA on the design of its voluntary prepayment plan ended yesterday. However, that is not the deadline for credit unions to inform the agency of whether or not it will participate, or to what extent. CUNA anticipates that now that the comment period has closed, the agency will take a few weeks to decide on a final plan, which they will announce to credit unions. Credit unions will likely have approximately 40 days after that announcement to tell NCUA whether or not they will commit any funds to the plan. In its comment letter CUNA wrote, “We believe there are several factors that have undermined greater support for the proposal.” Among those factors, CUNA said, is the opinion of some credit unions that the NCUA should have developed such a proposal sooner to avoid having to make decisions on a rushed basis. In addition, CUNA added, there are those credit union officials who would like to pay all remaining assessments now in one year and those who want to spread out those assessments over many years. Further the proposal is complex and not quickly understood, CUNA noted, and said that complexity is an important issue since credit union officials are “very busy in this new era of heightened oversight and continued challenges created by the current economic environment.” “Underlying all these issues is a general feeling of skepticism stemming from the agency’s past communication about the corporate stabilization, its handling of some of the corporate credit unions prior to their conservatorship, examination issues, and overregulation,” CUNA said. Nonetheless, CUNA said it continue to supports the concept of prepaid assessments, and called the agency proposal “a sound and creative approach to address the legitimate needs of credit unions.” CUNA recommended that the NCUA increase the minimum participation threshold for its prepayment plan from $300 million to $1 billion because doing so would increase the amount of possible assessment reduction, thereby making the program more attractive for credit unions. That change, CUNA said, could reduce the amount of assessments charged in 2011 and 2012 to 12 or 13 basis points. CUNA also encouraged the NCUA to allow credit unions of any size to participate in the plan if they wish to do so. To read more on CUNA’s concerns with the prepayment plan, as well its recommendations to make the plan more appealing to credit unions, use the resource link below.


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