IL supervisor urges changes in OTR,
FCU op fee methodologies

April 26, 2016 -- Noting that Illinois “leads the nation with 202 federally insured, state-chartered credit unions,” the state’s top credit union regulator has urged the NCUA to revise the overhead transfer rate (OTR) methodology and rely on safety and soundness exams of FCUs and FISCUs “to the greatest extent possible.”

In a letter submitted to the federal agency Tuesday (the comments-due deadline on the OTR methodology), Bryan A. Schneider, secretary of the IL Department of Financial and Professional Regulation, explained that the OTR is meant to cover the costs of administering the National Credit Union Share Insurance Fund (NCUSIF), which is clearly part of the NCUA 's insurer responsibilities.

“While those administrative costs include certain safely and soundness concerns, it appears that NCUA has transferred all or nearly all its safety and soundness costs to the insurance fund, thus blurring what are supposed to be separate and distinct responsibilities that are clearly and separately delineated  in the FCUA,” Schneider wrote.

The Illinois regulator added that over time there has been a “troubling increase in the OTR” and a corresponding decrease in operating fees collected from federal credit unions. He stated that, taken together, these developments have “had a discriminatory effect on state credit unions” that pay into the NCUSIF, in additional to fees and assessment to their state chartering authorities.

“I urge, therefore, that NCUA in an open and transparent manner, revise the FCU operating fee methodology to fully fund the safety and soundness examination of FCUs and revise the OTR methodology to rely on the safety and soundness exams of FCUs and FISCUs to the greatest extent possible,” Schneider wrote. “You have my commitment that this Department will constantly improve the process by which we undertake safety and soundness examinations of our Illinois-chartered credit unions, the reports of which NCUA is entitled to rely upon for insurance purposes to the maximum extent feasible.”


OTR methodology comment letter by IL regulator