Letters illustrate desire for change in OTR status quo

April 27, 2016 -- Of the nearly two dozen comment letters on the overhead transfer rate that NASCUS has seen, all have one thing in common: the OTR status quo needs change.

And that sentiment is represented by broad swath of the credit union movement.

NASCUS has posted or linked to a number of letters submitted to the agency about the issue on its website (see link below), including those from state regulatory agencies, credit unions, both national credit union trade associations and others. Each letter that NASCUS has reviewed contains at least one, and usually more, recommendations that the agency make substantive changes to the way it is now administering the OTR.

NASCUS, in its comment letter (submitted April 26) suggested four alternatives to the current system for NCUA to consider.

The two national trade groups, representing the broadest group of stakeholders, offered the broadest view from the credit union system on changes that should be made.

The Credit Union Natl. Assn. (CUNA) – the nation’s largest trade group for credit unions, representing credit unions and state credit union associations -- suggested in its letter that the agency is attributing too many actions to “insurance-related costs.” “Safety and soundness should not be a catch-all by which NCUA can allocate all of its activities for purposes of having the NCUSIF fund the agency,” wrote CUNA Senior Director of Advocacy and Counsel Andrew Price.

The CUNA letter urged NCUA to consider an alternative approach to setting the OTR. “Although examination and supervision support the insurance function, they are primarily the responsibility of the chartering authority, the prudential regulator: NCUA for FCUs and the various SSAs for FISCUs,” Price wrote. He suggested that, based on the association’s analysis of recent factors, the OTR should be in the range of 62% to 67% instead of the current 73.1%. However, he noted that range could drop: “If, as we have urged elsewhere in this letter, NCUA would make better use of SSA examination results by examining healthy State-chartered credit unions on an alternating basis on an 18-month cycle, the OTR would likely fall below 60% and NCUA’s total budget would also be reduced.”

The National Association of Federal Credit Unions (NAFCU) – which largely counts federally chartered credit unions in its membership – urged NCUA in its letter to abandon the recently adopted agency policy delegating to senior staff (the director of the office of Examinations and Insurance) responsibility for setting the OTR. “We believe the Board should continue to use its judgement and perspective when reviewing the OTR, especially as there are still components of the OTR that are not entirely objective or transparent.”


NASCUS OTR resources page (including links to letters, and NCUA OTR letters page)

NASCUS OTR comment methodology letter