Charter Simplification, Overdraft Rule on NCUA Agenda
The NCUA's Spring Regulatory Agenda focused on simplified the chartering process for new credit unions and overdraft protections for members. Learn why.
Agency’s Spring Regulatory Agenda focuses on simplified chartering process for new credit unions, overdraft protections for members.
During the next six months, the National Credit Union Administration (NCUA) may issue a proposed rule simplifying its charter approval process for new credit unions along with a final rule governing overdraft, the agency said in its Spring Regulatory Agenda, released Tuesday.
The agency board has said it wants to make it easier for groups to form credit unions and, as part of their Advancing Communities through Credit, Education, Stability and Support initiative, they are considering a rule that “would remove outdated requirements, simplify the charter approval process, and clarify regulatory language.”
Twice a year, executive agencies as well as many independent agencies file agendas detailing their upcoming rules and those that they may consider sometime in the future. Those agencies include both the NCUA and the Consumer Financial Protection Bureau (CFPB).
The CFPB, in its agenda, says it may issue a final rule requiring financial institutions to reveal data on their lending to women- and minority-owned businesses. Credit union trade groups and many congressional Republicans vehemently opposed the plan when the proposal first was issued. In the agenda, CFPB officials simply state that the next step in the process is the issuance of a final rule.
Notably, the CFPB does not list overdraft policies as one of the issues it plans to address during the next six months. Agency Director Rohit Chopra caused an outcry from the financial services industry when he referred to overdraft and similar charges as “junk fees.” The CFPB has collected public comment on the issue.
In their agendas, the agencies outline the topics of rules to be addressed and provide little information as to the substance of the regulation. And while the agendas include a target date for rules to be issued, in most cases those dates serve only as placeholders and are not binding.
What Else Is on the NCUA’s Agenda?
In the preamble to its agenda, the agency outlined its regulatory philosophy, stating: “The NCUA’s policy is to ensure that regulations: (1) impose only the minimum required burden on those they affect; (2) are clear and understandable; (3) are appropriate for the size of credit unions to which they pertain; and (4) are issued only after full public participation.”
On overdrafts, the agency noted the comment period on a proposed rule has ended, adding they are reviewing comments received. That proposed rule eliminated a 45-day requirement for a member to deposit funds or obtain a loan from the federal credit union to cover each overdraft. In its place, the new proposed rule would establish a reasonable time limit for members to cover their overdrafts.
NCUA board Chairman Todd Harper has spoken often about his desire to provide more assistance to members who have overdrafts, although the agency board could be divided on the issue.
NCUA Board Chairman Todd Harper
In its Spring regulatory agenda, the NCUA also said it may:
–Issue a final rule codifying procedures governing transactions in which a federally insured credit union assumes the liabilities of an institution other than a credit union. (Banking trade groups have expressed concerns about the number of banks being purchased by credit unions.)
–A final rule governing succession planning by federal credit unions. (The NCUA had issued a proposed rule on the issue and the agency said it is reviewing comments received.)
–A proposed rule to make more flexible a federal credit union’s ability to use advanced technology and opportunities offered by the fintech sector.
–A proposed rule to provide credit unions with more flexible investment options. (Agency officials said certain provisions are “overly restrictive and unnecessary from a safety and soundness perspective.”)
–A proposed rule that would clarify federal credit unions’ authority to purchase, sell and pledge loans.
–A proposed rule to “modernize” the agency’s regulations governing compensation in connection with loans to members and lines of credit to members.
–A proposed rule that revises the NCUA’s prohibition of golden parachute and indemnification payments to an institution-affiliated person. (The proposed rule would be intended to clarify the regulation and would include a section on merger-related financial arrangements.)
In addition, the NCUA is reviewing comments submitted to the agency on decentralized finance and digital assets to determine if it needs to propose any regulatory action.
What Else Is on the CFPB’s Agenda?
The CFPB said it likely will take the next steps toward issuing a rule governing the information that financial institutions must provide to consumers upon request. This comes after the agency issued an Advance Notice of Proposed Rulemaking in November of 2020.
Agency officials said they expect to release materials about the issue before convening a small business impact panel that is required under federal law.