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With NCUA Board member Dennis Dollar's insertion of an item in the June 6 board meeting proposing the repeal of a controversial privacy amendment approved at the May 8 special board meeting, lobbying efforts against the amendment are heating up. Dollar himself is preparing for a battle royale over the provision that codifies privacy and "opt out" notices for co-signers and guarantors of CU loans, and he has mobilized a number of arguments-including the fact that all other FFIEC regulators now have declined to adopt the measure-in his corner. "I really believe the board should debate this issue more fully and completely than we did...," Dollar said on the subject, after hearing that his agenda item had been made public. "The amendment has far-reaching ramifications and deserves a fuller hearing." Dollar said that NCUA's unilateral adoption of the requirement leaves credit unions at a "compliance disadvantage with other financial institutions," would be costly to credit unions, and could actually have an effect at cross-purposes with its design. He explained that the provision would actually force data, which is not now automated and therefore not used for cross-marketing purposes, to become automated and subject to data mining-and, hence, then possibly exempt from protection under one of the privacy rule's exceptions. CUNA, too, is again weighing in on the subject with a May 18 follow-up to its May 9 letter to the NCUA Board (NAFCU wrote one on May 16). In it CUNA President Dan Mica makes the points that: the unilateral NCUA action may have been improper, given its inconsistency with the rules of other FFIEC regulators; that the amendment is costly for CUs, provides no real consumer protection, and puts credit unions at a competitive disadvantage; and that the impromptu requirement may even be at variance with federal laws discouraging regulatory actions having adverse impacts on small financial institutions.
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The second circuit court of appeals in Manhattan, New York May 8 has upheld a lower court ruling that NCUA's conservatorship of P&SFCU was legal. Six of nine P&SFCU directors, who were ousted in NCUA's April, 1999 seizure of the $600 million-asset, ethnic-based credit union, challenged the agency action last May, and in July were rebuffed by a Brooklyn district court. In December they appealed the lower court decision claiming that NCUA overstepped its conservatorship authority in seizing a federal credit union when lesser punitive measures could have been taken. The New York Court of Appeals for the Second Circuit, however, rejected this argument and upheld the lower court ruling.
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Asked about a provocative trade press report claiming that he laid the blame for any federal charter erosion on trade association concessions made in the passage of H.R. 1151, NCUA Board Chairman Norman D'Amours said he was misrepresented, insisting that the thrust of his remarks was that any federal charter erosion was the result of lowered state charter standards and not concessions made in gaining H.R. 1151's passage. "The problem's roots...," D'Amours added, "(are in NCUA) granting of overlaps...the granting of expansions...overlaps without concern for even safety and soundness...(and) the states granting broader and broader fields of memberships, (and) attenuating the common bond. I think that's the root of the problem, not H.R. 1151." -
gmcorrigan@mindspring.com
