"Let's be clear," said Alan Theriault, CEO of CU Financial Services, a noted consultant whose firm has helped the majority of credit unions that have converted to make the change. "NCUA is not acting as the insurer or the regulator, NCUA is the cheerleader for the credit union industry. That's all, and the agency is thwarting the clear will of Congress."
In an e-mailed response to questions about the data posting, the agency reported that it had been posting data comparing overall bank and credit union interest rates since 2006, when it began requiring them to be included in the disclosure documents accompanying the charter change process.
NCUA began adding data from converted credit unions after some credit unions began referencing similar data as part of their charter-change process.
"NCUA noted in 2007 that the converting credit unions were using rate data from the few credit unions that had converted to banks to support their conversion proposals," NCUA Director of Public and Congressional Affairs John McKechnie wrote. "NCUA began tracking rates of converted credit unions as well and posted that data for January 2008 and again for March 2008 to ensure that future credit unions contemplating conversion had access to this data."
What happens to savings and loan rates after a nonprofit credit union becomes a for-profit bank has long been one of the most controversial issues surrounding the charter-change debate.
In general, credit unions wishing to convert their charters tell members that the charter change will not bring any meaningful change to loan and savings rates, while credit union members who oppose the change point to data that show higher rates for banks.
Further confusion might have arisen, McKechnie explained, when the NCUA webmaster took the data off the site as part of routine maintenance, and the agency reposted it, inadvertently making it appear new.
The agency posted the data to its Web site during the process of amending its charter-change regulation in 2006, but they were taken down when the proposed and final rules were taken down. NCUA never meant for the data to be removed when the regulations were and so it was reposted, McKechnie said.
In a footnote to the 2006 regulations, the agency explained why it thought the rate data significant.
"In automobile lending and in long-term savings, the credit union rates were far superior to bank rates," NCUA said. "For two of the 20 products examined, mortgage lending and passbook savings, bank and credit union rates were almost identical, but there was no product of the 20 examined where banks' rates were clearly better than credit unions' rates. This data is average data; and rates will vary by particular financial institution and particular product. NCUA believes that average data over thousands of institutions is more reliable than individual institutional data because average data removes the effects of short-term promotional rates."
NCUA was also careful to use DATATRAC, a widely recognized source of information about financial institutions for its data.
"Datatrac is the exclusive provider of deposit and loan interest rate data to the American Bankers Association (ABA), Credit Union National Association (CUNA), National Association of Federal Credit Unions (NAFCU), Bank Administration Institute (BAI) and Financial Managers Society (FMS). Datatrac's rate information has been quoted in newspapers, television and Web sites nationwide," the agency wrote in another footnote to its 2006 regulation.
But Theriault was not mollified. "It was Congress' clear intent that the process of converting from a credit union to mutual bank charter to be no more difficult than any other sort of charter conversion," he said. "If you look at the other financial regulatory agencies, their regulations on charter change maybe about a page. NCUA is up to 17 pages."
For its part, NCUA has countered with the observation that credit union-to-bank charter changes are unique because of the change in tax status, institution ownership and movement from a nonprofit to for-profit business. When viewed in light of these facts, the process is different from other charter-change processes, which don't involve anything like moving from being a nonprofit to a for-profit business.
This is an argument that has yet to be fully tested or explored in court, and Theriault scoffed at NCUA's reasoning for posting it. He noted that whether NCUA thought the law well-reasoned or not, it remained the law.
"You might not like it or agree with it, but the meaning of the law is clear on its face," he said.
Later, in an e-mail addendum to a previous interview, Theriault also attacked the data NCUA used.
"Hard data from NCUA and FDIC call reports illustrate that NCUA's purchased survey is inconclusive and misrepresents reality when it comes to interest paid on member deposits compared to banks," Theriault wrote. "The NCUA and FDIC data, which includes all institutions, illustrates that banks paid more interest as a percentage of interest-bearing deposits in seven out of 10 years. Why doesn't NCUA have a link to this data and require this disclosure?"