WASHINGTON (6/28/11)--In advance of the National Credit Union Administration’s (NCUA) Wednesday meeting to consider whether to advance its idea to allow credit unions a prepayment option for their corporate stabilization assessments, the Credit Union National Association (CUNA) Monday wrote to the agency board members reiterating the group’s strong support for the plan. CUNA also urged the NCUA board to incorporate into a final plan changes CUNA has recommended, including allowing payment of some interest on the prepaid funds. The recommendations include:
* Raising the target minimum commitment level to $1 billion, up from $300 million; * Avoiding the establishment of an unneeded, additional liquidity buffer for the fund and instead applying any excess prepayments against this year’s assessments on a pro-rata basis; and * Allowing small credit unions to participate in the program if they want to do so, rather than setting a $10,000 prepayment minimum. That minimum could keep credit unions with assets less than $2.8 million--or about 6,023 credit unions--from being able to participate.
As noted, CUNA also urged the agency to amend its proposal to allow payment of some interest on the prepaid assessments. “While we understand that NCUA has determined that under the Federal Credit Union Act (FCU Act) it is essential that the ‘gift’ nature of the prepayments be preserved, the payment of at least some interest on the prepayments is a very important issue for credit unions,” CUNA President/CEO Bill Cheney wrote. Cheney added that an Internal Revenue Service (IRS) definition of “gift,” which has been recognized by the courts, states “a gift is made when someone provides property (including money) without expecting to receive something of at least equal value in return.” “We believe the payment of at least some interest on the prepaid (assessments) pegged to, but somewhat less than, the rate that (Temporary Corporate Credit Union Stabilization Fund) pays to the U.S. Treasury for its line of credit would be permissible, consistent with the FCU Act and the IRS’s definition,” Cheney wrote. The NCUA is scheduled to meet Wednesday to decide whether or not to establish a prepayment plan for corporate fund assessments. Even if the agency decides then to move ahead at that time, it has said it will not implement a plan if "subscriptions" by credit unions total less than $300 million. It is expected that credit unions will have 40 days after this week’s meeting to notify the agency of intentions to participate.