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Home-based CUs May Need a Second Address Under NCUA Plan
ALEXANDRIA, Va. (12/13/13)--A proposal that would modify the operations of home-based federal credit unions was one of the most discussed items at Thursday's National Credit Union Administration open board meeting.

Click to view larger image National Credit Union Administration board members hear a staff presentation on proposed regulations for home-based credit unions during Thursday's open board meeting. (CUNA Photo)
The proposal would require small home-based federal credit unions to have a business office of the credit union outside of a residence or have another public location that is appropriate for contacts with the NCUA. Also, the credit union would have to have either a dedicated phone number or email address for contact with the NCUA and members.

The rule eventually would prohibit the FCUs from operating out of homes. All federal credit unions would have to maintain a business office not located in a home within two years of the final rule's effective date. Storage of credit union records at residential locations would also be prohibited.

According to NCUA, there are approximately 95 remaining home-based, federally insured credit unions, 14 of which are state chartered. The agency plans to provide grants and other assistance to help these institutions relocate.

The NCUA proposed the changes to address concerns about member privacy, public access and the safety and working conditions of NCUA's examination staff.

Operating credit unions out of private residences raises regulatory and supervisory concerns, including operational risks, privacy risks and potential conflicts of interest, the NCUA said.

NCUA Chairman Debbie Matz said "most credit union members, especially young members, want to conduct business from their homes online, not visit someone else's private home to conduct business." Further, she said, operating a credit union inside the manager's home, with no internal controls, creates "ample opportunity for fraud and violation of members' privacy."

Examiner safety can also be threatened when they enter home-based credit unions, agency staff noted during the meeting. They recounted incidents in which examiners were bitten by dogs, denied the use of a restroom, or forced to work in other odd conditions as they complete their examinations.

NCUA board member Michael Fryzel was the lone dissenting vote on this proposal, and he questioned whether the Federal Credit Union Act gave the agency the authority to tell credit unions they must have commercial space.

Fryzel said requiring credit unions to operate out of a commercial space would not necessarily deter thieves. If somebody's going to steal they are going to steal regardless of whether the credit union is home based or in a big luxury building, he said. He also emphasized that many home-based or church-based credit unions do not want to grow. "In my opinion this is going to put a lot of them out of business if they need to get commercial space," Fryzel said.

The proposed rule was released for a 30-day comment period.

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