Dec. 9, 2016
State CUs build share of total assets
State chartered credit unions now hold about 49% of all credit union assets, according to third-quarter figures released by NCUA this week (and additional numbers for privately insured credit unions compiled by NASCUS), an increase for the state financial institutions of 6.7% since the beginning of the year (FCUs grew by 5.4% over the same period). The nation’s more than 2,300 state-chartered credit unions (both federally and privately insured) now hold nearly $631 billion in assets, according to the third-quarter numbers. Meanwhile, memberships among the state chartered credit unions has pushed to 51.2 million members, up 3.2% since the end of last year. Total assets for all credit unions, as of Sept. 30, stood just shy of $1.3 trillion, with 107 million memberships across 5,966 credit unions.
In other figures comparing federal credit unions to state chartered, federally insured institutions, the two credit union types showed similar results in several areas. Returns on average assets were 0.79 for states to 0.78 for FCUs, net worth ratios 10.78% to 10.91%, and nearly identical loan to share ratios were posted of 78.8% to 78.4%, the NCUA numbers show. Additionally, FISCUs and FCUs performed comparably in delinquency rates (0.75 to 0.79), net charge offs (0.35 to 0.45) and net interest margins (3.04 to 2.96). Membership growth at the state and federal credit unions was virtually identical (3.7% for FCUs). However, in loans, state chartered, federally insured credit unions grew by 8.2%, compared to 7.1% for the FCUs.
NASCUS President and CEO Lucy Ito praised state credit union boards, management and regulators for the growth. “When we work together to craft an enabliing regulatory environment, while ensuring safety and soundness, the benefits to members are obvious,” Ito said. “The state system is growing responsibly and robustly, with more consumers reaping the rewards.”
Meanwhile, it was announced this week that another federal credit union has switched to a state charter and obtained private insurance – the fourth credit union to do so in the last 18 months, according to American Share Insurance (ASI), the private insurer of credit union deposits. ASI stated that Alliance Credit Union, a $234.4 million institution in Lubbock, Texas, changed charters and insurance. Others that have converted in the last year and a half are: Latah Credit Union (Moscow, ID), $88.2 million; Eastex Credit Union (Evadale, TX), $73.4 million; Glendale Area Schools Credit Union (Glendale, CA), $341.4 million.
SUMMARY OUTLINES NEW FOM RULE, EFFECTIVE FEB. 6 …
NCUA’s new rule on field membership – published this week in the Federal Register (Wednesday, Dec. 7), and set to take effect Feb. 6 (that is, if the regulation survives a challenge by the banking industry; see next item). – is summarized in the latest offering from NASCUS. The summary notes that the 268-page rule only affects federal credit unions; state credit unions should look to their to state law for their FOM rules. However, the summary also explains that the new rule amends numerous elements of the existing FOM rules, in particular, it makes changes to the:
- Definition of a local community, a rural district and an underserved area;
- Chartering and expansion of multiple common bond FCUs;
- Expansion of a single common bond FCU that serves a trade , industry or profession (TIPs);
- Chartering or expansion of any FCU.
The summary points out that the FOM rules provide for three kinds of FCU memberships: a single common bond whose members all share the same occupation or association; a multiple common bond whose various groups share distinct occupation or association bonds, and; a community common bond among persons or organizations within a well-defined local community, neighborhood, or rural district. An FCU must choose one of the above FOMs, it cannot mix them together, the summary states.
… AS BANKER TRADE GROUP IMMEDIATELY CHALLENGES NEW RULE
Meanwhile, the American Bankers Association (ABA) -- as expected -- filed on the same day that the final FOM rule was published a lawsuit against the federal agency, challenging the new rule. In a statement, the trade group averred that the rule "disregards Congress' explicit instruction that community credit unions serve only a single, well-defined local community. Instead, it declares that large regions including millions of residents and cutting across multiple states are single 'local' communities." The banker group suggested that the rule goes "well beyond congressional limits."
When the final rule was approved by the NCUA Board at its Oct. 27 meeting, the agency released a “board action bulletin” through its public affairs office which noted that “In recent years, several states have updated their field-of-membership rules for state-chartered credit unions.” The bulletin also quoted NCUA Board Member J. Mark McWatters (an attorney) stating that, within requirements of federal law, the final FOM rule would similarly enhance consumer access to credit by “sensibly and reasonably updating NCUA’s rules.” “During our deliberations, I carefully examined the Federal Credit Union Act and the requirements of the Administrative Procedure Act,” McWatters states in the bulletin. “Based on more than 30 years of legal experience working with issues of complex statutory interpretation, I am confident that the final rule we’ve approved today follows the law. More importantly, these changes will expand access to affordable financial services for consumers, including those in underserved communities.” NCUA had no comment on the bankers’ filings this week.
BOARD TO HEAR BRIEFING ON NGNS, CONSIDER TX BIZ LOAN RULE (AND MORE)
The NCUA Board will hear a briefing on the strategy for the disposition of legacy assets in the NCUA Guaranteed Notes (NGNs) that underpin the resolution of corporate credit unions, consider approval of the revised Texas member business loan rule, and consider final and interim rules for federal credit unions. The board meets Thursday (Dec. 15) in Alexandria, Va. In a letter to credit unions issued last week, NCUA noted that it did not expect to charge credit unions an assessment for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), which funds the guaranty of payment of interest and principal at maturity for the NGNs. “Notwithstanding a major, unexpected development, such as a severe economic downturn, the Stabilization Fund assessment is expected to be zero for 2017,” the letter stated. “However, if adverse conditions develop, the NCUA Board may have to reconsider an assessment,” the letter added. In other action, the board will consider a final rule on FCU occupancy, planning, and disposal of acquired and abandoned premises, and; consider a final interim rule about Freedom of Information Act (FOIA) responses. Additionally, the board will consider approval of the member business lending rule adopted by the state of Texas, in terms of conformance with agency regulations.
‘REG ALERT’ FROM AGENCY OUTLINES NEW RULES ON ‘PRE-PAID’ ACCOUNTS
New rules on prepaid accounts from the CFPB are the subject of an NCUA “Regulatory Alert” issued this week to all federally insured credit unions, which the agency stated creates “comprehensive federal consumer protections for prepaid financial products under Regulations E and Z,” and which applies to a wide range of pre-paid instruments. The CFPB rules were adopted in October, and take effect on pre-paid accounts as of Oct. 1, 2017. Prepaid account issuers must submit all of their prepaid account agreements to CFPB starting a year after that (Oct. 1, 2018). NASCUS, also in October, issued its own summary of the CFPB rule, which provides a high-level (but detailed) review of the prepaid rule. NASCUS will also develop a summary of the NCUA Regulatory Alert for its members’ use.
BUREAU UPDATES STATUS OF DEBT COLLECTION, ARBITRATION, OVERDRAFT
A report on findings of a consumer survey related to a proposed rule regulating debt collection – and other actions – are outlined in the Consumer Financial Protection Bureau’s Fall 2016 rulemaking agenda, published late last week by the agency. The survey collected information from consumers about their experiences with debt collection; publication of results (expected early next year) follows proposals published by the agency this summer to limit collector contact and to ensure correct debt is collected.
Also on the rulemaking agenda, CFPB stated that it is:
- Reviewing comments on its proposal concerning arbitration clauses in consumer financial agreements. The proposal, CFPB noted, was primarily focused on addressing concerns that arbitration clauses are being used to prevent groups of consumers from joining together to seek effective relief from wrongdoing by financial companies.
- Reviewing comments on its notice of proposed rulemaking regarding payday, auto title and similar lending products. According to CFPB, it has been “particularly concerned” about practices that result in the products becoming debt traps for consumers.
- Continuing research, and has begun consumer testing initiatives, related to the “opt-in” process for checking overdraft services.
- In early stages of implementing section 1071 of the Dodd-Frank Act, amending the Equal Credit Opportunity Act, to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses.
In other CFPB-related developments this week, the major trade groups for credit unions and banks (CUNA and Natl. Assn. of FCUs for CUs; ABA and Independent Community Bankers of America for banks) sent a letter to Senate leaders Mitch McConnell (R-Ky.) and Chuck Schumer (D-N.Y.) urging them to support legislation creating a five-person, bipartisan board to govern the bureau as “one of the many commonsense regulatory improvements you will consider next year.”
BRIEFLY: 3rd term for chairman; KY directors/executive forum; Nat’l Meeting registration open
Rep. Jeb Hensarling, R-Texas, was re-elected to a third term as chairman of the House Financial Services Committee last week, a position that provides him with a prime perch for seeing through his plans for financial regulatory reform, as outlined in his Financial CHOICE Act (which includes NCUA Board reforms, and transparency for the OTR) … Expect to be in or around the Bluegrass State Feb. 7? Come to the NASCUS Kentucky Directors’ College and Executive Forum, sponsored by NASCUS, the Kentucky Department of Financial Institutions and the Kentucky Credit Union League. It’s an all-day program providing the opportunity for credit union directors and executives to take an in-depth look at issues, trends and the regulatory environment … Registration for the 2017 NASCUS State Regulators’ National Meeting (regulators only) March 20-21 in Washington, is now open; see the link below (Note: hotel registration cutoff is Feb. 28.)National Meeting (March 20-21) details and registration
Patrick Keefe, NASCUS Communications, email@example.com or (703) 528-5974