Ito urges public review of OTR in op-ed

JULY 13, 2015 - The favoritism that the “overhead transfer rate” engenders for federal credit unions over state charters must come to an end if the if the dual-chartering system is to thrive, NASCUS President and CEO Lucy Ito writes in an editorial appearing in The Credit Union Journal today (July 13).

“The overhead transfer rate — the percentage of funds that the NCUA shifts from the National Credit Union Share Insurance Fund (NCUSIF) to cover ‘insurance-related expenses" — is a long-standing issue for state-chartered credit unions, and particularly NASCUS,” Ito wrote. “In our view, the OTR has become an inequitable distribution, which favors the federal credit union charter over the state charter by essentially lowering FCU operating fees by reallocating a significant portion of the expense related to FCU supervision from direct FCU operating fees to the NCUSIF, which is funded in part by state-chartered credit unions.”

In the piece, the NASCUS leader notes that, in June, the association injected into this extended debate over the OTR the details of a new legal analysis, performed by experts in the field of financial institution law and regulation, which concluded that the overhead transfer rate is a "major rule" subject to "notice and comment" requirements under the federal Administrative Procedure Act (APA).

She noted that this “new approach” can be instrumental in offering stakeholders the opportunity to weigh in on the rate's future adjustments by NCUA, and correct the inequitable distribution of funds transferred from the insurance fund to cover agency expenses.

“When all is said and done, our collective concern about the OTR is not an academic exercise saddled in bureaucratic legalese. This is about dollars and cents, with NCUA cutting federal operating fees by tapping the money contributed by both federal and state charters,” she wrote. “Let's open the OTR methodology to public comment, to assure both transparency in the process, equity in the costs borne by federal and state credit unions — and a continuing, strong dual chartering system.”

CU JOURNAL: NCUA Should Open OTR to Public Review

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