In a pair of closely watched actions on June 22, the National Credit Union Administration board ? regulator of the nation?s 8,600 federally insured credit unions ? reined in some credit unions? banker-contested authority to serve low- and moderate-income consumers, but then proposed controversial tightening rules for credit unions converting to mutual savings banks.
“The true fault and blame for the situation lays squarely at the feet of the bankers,” said Credit Union National Association President Dan Mica to the low-income rule.
Federally insured credit unions are member-owned, nonprofit, tax-exempt financial mutuals that have strict member eligibility rules, and can only convert to a taxed, for-profit mutual bank under NCUA ? or state regulator-approved voting conditions.
Both areas are the subject of intense banker scrutiny and contention, owing in large part to banker objection to the credit union tax-exemption and rules they say discourage conversion to mutual banks.
The first board action was prompted by a banker-brought federal lawsuit in Utah, disputing the legality of two federal credit union charter types to add outside, low-income areas to their fields of membership.
The board?s 2-1 retrenchment of this expansion authority ? while grandfathering existing additions and their growth ? was welcomed tepidly by banking trade associations and with qualified relief by some credit union officials
“We?re not pleased that the NCUA had to do what they did,” said National Association of Federal Credit Unions President Fred Becker Jr., “but we?re pleased that the credit unions that already had the areas were able to keep them.”
Banking trades, however, denounced the conversion-tightening action as obstructive.
“The proposed conversion rule would make the disclosures when a credit union chooses to convert more cumbersome and anti-conversion,” said Diane Casey-Landry, American Community Bankers president and CEO.
The low-income rule is expected to affect only about 200 credit unions. The conversion rule potentially affects all 8,600 federally insured credit unions.
