Preserving Diversity in the Credit Union System
Given the volatile nature of the recent economic crisis, it was inevitable that pressure would build on regulators to respond to the crisis with additional regulations. Certainly some of these new regulations were promulgated in response to poor practices that exposed gaps in regulation. If credit unions are feeling overwhelmed by new regulations and compliance obligations, it's completely understandable.
As regulators continue to provide for a safe and sound operating environment for credit unions, I encourage the system to not lose sight of what has worked for nearly 100 years–the credit union dual chartering system.
As we move forward in a new economic and operating environment, I caution the system against a one-size-fits-all and homogenization of the credit union system. There are those, both inside and outside the credit union system, who would seek to do just that to state and federal credit unions. There are those who would seek to blend all the regulations, all of the business approaches and all the regulatory philosophies into one. There is danger in thinking that eliminating the differences between state and federal charters would result in a leveled playing field and less exposure to risk. NASCUS disagrees with this premise. Blurring the distinctions between state and federal charters does not level the playing field. Rather, it drains innovation.
Recently, NASCUS wrote to the NCUA regarding its proposed CUSO and loan participation proposals. Historically, state-chartered federally insured credit unions have looked to state law and regulation to govern their loan participation and CUSO activities. These proposals leave little flexibility for states to authorize distinct powers for their credit unions–a disturbing trend and concern to NASCUS with respect to the long-term viability of the dual chartering system. The possible result is a continued standardization of the natural person credit union system, a trend that is more than unfortunate, it is unnecessary and detrimental to the long-term health of both the state and federal systems.