A series of regulatory relief proposals that could potentially benefit credit unions were approved by the National Credit Union Administration (NCUA) at the monthly open board meeting in September. Proposals that would expand definitions of small credit unions and rural areas, and give credit unions greater investment authority were included.
At the meeting, the agency also approved an advanced notice of proposed rulemaking that seeks public comment on its payday loan alternative program.
NCUA board members hear a staff presentation during the September open board meeting.
NCUA Chairman Debbie Matz said all four of these agenda items address issues raised by credit unions during the agency's recent listening sessions. "As we begin the second year of our regulatory modernization initiative, we will continue to listen to credit unions and other stakeholders to identify further opportunities to provide regulatory relief while protecting safety and soundness," she added.
The small credit union proposal, which was unanimously approved by the NCUA board, would triple the asset test that defines a "small" credit union--to $30 million in assets, up from the current $10 million threshold. Agency staff said they considered a range of new asset thresholds before settling on the $30 million limit.
Credit Union National Association (CUNA) President/CEO Bill Cheney, following the meeting, said CUNA appreciates the NCUA's decision to increase this threshold, "but we are convinced that it would be more beneficial--and realistic--for the board ultimately to go higher than that threshold."
The proposal will be released for a 30-day comment period, and NCUA Board Member Michael Fryzel encouraged credit unions that believe the threshold should be higher to state their case in their comments.
If approved, the small credit union definition expansion would provide additional regulatory compliance relief for small credit unions in current and future regulations, such as risk-based net worth requirements and a pending interest rate risk final rule.
These newly added small credit unions would also have access to support services provided by the NCUA's Office of Small Credit Union Initiatives (OSCUI), and OSCUI Director William Myers said his staff is changing some training and consulting methods to broaden the scope of its work, but would not add new staff to help deal with the increased number of small credit unions. Rather, OSCUI would extend its reach by using technology and increasing efficiency in other areas.
The agency will reexamine its small credit union threshold every three years, if a new threshold is approved.
Matz said the agency wants to move the small credit union proposal quickly through the approval process. "To help more small credit unions remain viable, we need to provide greater resources and impose fewer burdens," she added.
The NCUA also approved:
A proposal that would allow credit unions to invest in Treasury Inflation Protection Securities (TIPS), which are government-issued securities that are repriced to reflect inflation and deflation, with the adjusted or original principal being paid out at maturity; and
A proposed rule that would expand the agency's definition of "rural district" for fields of membership to geographic areas with 200,000 or fewer inhabitants or less than 3% of a given state's population.
NCUA staff said the TIPS investment authority will provide credit unions with an additional investment portfolio risk management tool that can be useful in inflationary economies.
Cheney said CUNA supports both the TIPS investment authority and the "rural district" definition changes, but also urges the agency to consider expanding both proposals to cover state chartered credit unions.
The TIPS and rural district proposals will both be released for 60-day comment periods.
The NCUA also released an advanced notice of proposed rulemaking (ANPR) seeking comment on how the agency could improve its Payday-Alternative Loan (PAL) rule, formerly known as short-term, small amount loans.
Federal credit unions are currently allowed to offer PAL loans to their members as an alternative to predatory payday loans that are offered by other financial service providers. Federal credit unions may charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. A $20 application fee may also be charged. The loans may total as high as $1,000 and may last for as long as six months, and the loans cannot be rolled over.
The NCUA ANPR asks if the agency should consider alterations to the permissible short-term loan rate, loan range, loan maturity length, and other loan requirements. The agency also asked for details on any viable payday-alternative products credit unions are currently offering their members.
The PAL ANPR will be open for public comment for 30 days.
For more on the NCUA board meeting, click here.