WASHINGTON (10/28/11)--The Credit Union National Association (CUNA) suggested adopting a temporary moratorium on new regulations as one of many ways the National Credit Union Administration (NCUA) could ease the regulatory burden on credit unions, and is also working on the legislative front to address these same issues.
CUNA in a 14-page letter sent Tuesday to NCUA Chairman Debbie Matz said "there is considerable merit in this idea, especially as there are no new, material systemic problems within the credit union system" and "current safety and soundness concerns within natural person and corporate credit unions seem to be manageable." Any significant threats or technical matters could still be addressed by the agency, CUNA added. CUNA suggested the moratorium could last as long as six months.
When the agency does create new regulations, those regulations should be limited to addressing material safety and soundness problems, and any rules that are developed should apply only to those credit unions that engage in activities that directly cause the problems in question, unless otherwise directed by Congress, CUNA urged.
CUNA also called upon NCUA to solicit input from credit unions and credit union associations on whether a regulation is needed before proceeding with the development of a particular rule, as opposed to issuing a rule and then seeking comments. This is the approach that the Consumer Financial Protection Bureau is using, and it seems to be working well, CUNA noted. The agency should also support any rulemaking with supporting data detailing why the regulatory action is needed, and what the costs and paperwork burden of the regulatory action would ultimately be. While NCUA does include some of this information in proposals and final rules, it does not so consistently, the letter said.
Enforcement actions should also be limited. CUNA advocated, for example, that NCUA examiners make every effort to resolve disagreements with credit union officials before issuing a Document of Resolution (DOR) or Letter of Understanding and Agreement. While a recent NCUA Office of Inspector General Material Loss Review Report found that the agency has not been adequately following through with credit unions on whether DORs were resolved, this report should not be viewed as evidence that the NCUA needs to be more aggressive in issuing its DORs. Rather, CUNA said, credit unions should be permitted to pursue their own solutions, working with their examiner.
Healthy credit unions should also be permitted to manage their own risks by being able to decide for themselves whether they need to make additions to their net worth when it is at 7% or higher. CUNA also supported expanding the Regulatory Flexibility Program.
CUNA commended NCUA Chairman Matz for steps she has initiated recently to address regulatory burdens but urged the agency to consider many more ways to help relieve credit unions.
CUNA's Examination and Supervision Subcommittee, the American Association of Credit Union Leagues Regulatory Advocacy Advisory Committee, credit union officials, state league staff, and other leadership groups, including CUNA council members, worked to develop these recommendations.
CUNA has also addressed the credit union regulatory burden with other regulators as well as legislators on Capitol Hill. The most recent interaction with the legislative branch came Thursday, when CUNA commended Rep. Shelley Moore Capito (R-W. Va.) for holding a House hearing on an Internal Revenue Service (IRS) deposit income reporting requirement. That proposal, which was discussed during a House Financial Services financial institutions subcommittee hearing, would require credit unions and other financial institutions to report on their Form 1042-S interest of $10 or more earned annually on deposit accounts held by nonresident aliens who are residents of any foreign country.
CUNA in a letter to Moore Capito said this rule would "only contribute to the tremendous regulatory burdens credit unions face that make it increasingly harder for them to serve their members" and would also increase compliance costs for credit unions. The costs to financial institutions and consumers will far outweigh any benefit to the IRS, and CUNA added that that agency has not proven that the new regulation is needed.
For more on CUNA's regulatory relief efforts, use the resource links.