The opinion piece published May 23 by online industry news aggregator CUinsight was written by Utah Credit Union Association Vice President of Credit Union Support Stephen Nelson. It recreated terse conversations between small credit union presidents and examiners that Nelson said credit union leaders have recounted to him.
The editorial recounted the following exchange:
“CU President: It feels like you’re trying to kill me.
Examiner: Not you. You’ll make it, but others won’t.
CU President: I knew it! NCUA is trying to kill small credit unions!
Examiner: Yes, yes we are. But only credit unions of $XX million and under.”
“There’s no denying that all credit unions– not just small ones–feel like NCUA is trying to push them out of business,” Nelson wrote in the piece.
Not so, Fryzel countered in his June 11 letter to CUinsight editor Randy Smith.
“Only in [Nelson’s] mind would such an exchange of words take place between a credit union president and an examiner,” Fryzel wrote.
Nelson said he attempted to bring the “aggregate spirit of those semi-private conversations into the open” in the editorial and purposely included hyperbole.
“The point of the hyperbole was to hook readers so they would continue on to what I really wanted to say. I thought that certain parts were so obviously over the top and intended to be humorous that no one would take them at face value,” he said.
And, Nelson said executives at many credit unions, not just small ones, have speculated that the NCUA would prefer the easier task of regulating fewer credit unions.
Fryzel wrote that he begged to differ with Nelson’s assertions. He called the editorial, with the exception of claims of inconsistency, “unfounded, off base and just not correct.”
“NCUA has a commitment to all credit unions and to the system as a whole. Our goals are simple: protect the deposits of more than 92 million Americans, a safe and sound credit union system, and a strong share insurance fund,” Fryzel wrote.
The Utah association leader said he was shocked that Fryzel responded to his editorial, although he said he can empathize with Fryzel’s reaction. If someone wrote an article critical of the Utah association, Nelson said, he would respond the same way.
However, he said Fryzel’s response indicates NCUA isn’t aware of how some credit unions feel about their regulator.
“I was … surprised at [Fryzel’s] reaction because that's how many credit unions in my circles talk with each other about NCUA all the time. It's an almost weekly topic of conversation,” he said.
The Utah association vice president blamed the disconnect between the NCUA and credit unions on indirect, unspecific feedback from trade associations, much like the anecdotal examples he recreated in his editorial.
Fryzel said the Office of Small Credit Union Initiatives “has a phenomenal record of working with small or troubled credit unions.” He added that OSCUI Director Bill Myers has said a lack of a succession plan can present problems for small credit unions.
Former NCUA examiner and credit union executive Carolyn Warden agreed with Fryzel in her comments below the editorial. Warden, located in Chicago, told Credit Union Times she’s worked with credit union boards that don’t make a succession planning a priority and said available talent and competitive compensation also make it difficult to find leaders willing and able to run small credit unions.
Hand holding isn’t part of the NCUA’s charter, she said. Credit union boards are responsible for trained and engaged staff.
If credit unions are unprepared for exams, they won’t feel comfortable challenging an examiner, she said. Warden told the story of an examiner who had incorrectly informed a credit union that its GAP measure was greater than 100, which she said is mathematically impossible. The examiner mandated the credit union reduce long-term assets, including long-term loans.
“The CEO and board agreed it was easier to go along rather than speak up because they felt their regional director and examiner would retaliate against them,” she said.
However, had the CEO and volunteers been more knowledgeable about GAP analysis, they would have felt more comfortable explaining the error to the examiner.
“That could have prevented the examiner from going off the deep end,” she said. “But, they weren’t prepared enough to say ‘there’s a math error here’.”
Fryzel’s office said he was unavailable for an interview at press time.