Washington, D.C. (March 25, 2021) — The Independent Community Bankers of America (ICBA) today called on the National Credit Union Administration to withdraw a proposal to dramatically deregulate corporate entities the regulator is not authorized to supervise.
The NCUA proposal would allow for-profit companies owned by tax-exempt credit unions to make any type of loan permitted for federal credit unions—even though these companies are not supervised by the agency and are exempt from Federal Credit Union Act consumer protections.
"While community banks have led the pandemic response in local communities, the National Credit Union Administration is once again showing that federal laws and regulations governing the credit union industry are fundamentally flawed," ICBA President and CEO Rebeca Romero Rainey said today. "Instead of expanding the lending powers of privately owned companies it is not authorized to regulate, the NCUA should focus on promoting consumer protections and a safe and sound financial sector."
Credit union service organizations are owned by credit unions but do not follow these institutions' business model—they are not mutually owned, member owned, required to serve credit union members, overseen by credit union laws and regulations, or required to follow even the credit union industry's limited prudential safeguards.
Instead, CUSOs are privately owned and often for-profit businesses. However, the NCUA proposal would allow these “shadow credit unions” to originate, purchase, sell, and hold every kind of loan authorized for tax-exempt federal credit unions, including consumer credit and automobile-secured loans.
In today's letter, ICBA urged the NCUA to withdraw the proposal to avoid further eroding the credit union industry's tax-exempt mission while expanding risks to consumers, the fund insuring credit union member shares, and credit unions themselves. Should the NCUA move ahead, ICBA plans to urge the Financial Stability Oversight Council to study CUSOs to determine their risk to credit unions and whether prudential oversight is warranted.
The Independent Community Bankers of America creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ more than 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets, over $4.4 trillion in deposits, and more than $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.