The relentless push by credit unions to evade meaningful regulation under the Federal Credit Union Act has reached new heights of absurdity with the latest proposed rule before the National Credit Union Administration.
The “service facility” proposal would make it possible to add groups to a credit union’s field of membership on what is effectively a national basis – without regard to the statutory requirement of the credit union being in “reasonable proximity” to the people they are looking to serve.
This rule, which is being rushed to a decision on November 18 and over the objections of the current NCUA chair, would allow federal credit unions with multiple common bonds between members to effectively operate anywhere. This rule change so violates both the letter and the spirit of the Federal Credit Union Act that both the past chairman of the NCUA and the current chairman have opposed it.
The NCUA is tasked by Congress to “supervise” federal credit unions, but it too often acts like a blocker clearing a path for credit unions to run through to gain more customers, revenue, and territory—all with the benefit of tax exemptions, and without the burden of formally reporting on its community reinvestments, which appear to be moving swiftly in the wrong direction.
A vote by the NCUA this week to approve these rules would make abundantly clear the urgent need for credit unions to be subject to the Community Reinvestment Act. Other than mortgages, credit unions are not required to establish the extent to which they are providing financial services to low-and moderate-income individuals and communities. The opposite is the case for banks under CRA. That is an absurd dichotomy that needs Congressional fixing.
Former NCUA Chairman Mark McWatters said, “I am troubled that the agency may have abandoned… a rigorous and introspective analysis and its Congressional mandate to stay clearly within the four corners of the Federal Credit Union Act.”
Indeed, the ambitions of the nation’s federal credit unions for unbridled growth are difficult to contain within the four corners of the world. They will keep going until somebody with the proper authority says, “No!”
If that somebody isn’t the NCUA, then it should be Congress. It’s time to reform credit unions.
