Whether it's a question about member business lending or which activities CUSOs are allowed to engage in, CUSO executives said the NCUA's guidance letters have long been a go-to for answers and regulatory interpretations.
When the CEO of a commercial lending CUSO received an inquiry from one its credit union partners about a loan limit threshold in NCUA Regulation 723, which addresses MBLs, the executive logged on to the agency's website to peruse guidance letters for background.
He didn't find any specific direction on the issue but was surprised by what he did discover: a steady decrease in the number of letters issued by the agency.
The CUSO CEO, who said he preferred to remain anonymous, said, “Frankly, given the complexities of the current regulatory environment I would have assumed that we'd see more letters not less, so the data is a little surprising to me.”
The executive provided data that showed a substantial drop in NCUA guidance letters over a 20-year period, which Credit Union Times has confirmed. In 1993, the regulator issued 37 letters, followed by 32 letters in 1994, 33 letters in 1995 and 34 in 1996.
Source: Data compiled from NCUA website
Letters peaked significantly in 1997 with the NCUA providing 107 of them, according to the data. That increase occurred a year before the Credit Union Membership Access Act was signed into law in 1998. The act, which amended the Federal Credit Union Act, gave credit unions the authority to have multiple common bonds within their membership.
After the passage of CUMAA, NCUA guidance letters dropped to 67 in 1999 and continued to fall until 2003, when a slight increase occurred in 2008, before spiraling down into the single digits in 2012. And so far this year, the regulator has only issued four letters.
“The way NCUA communicates with the industry has evolved greatly since 1995,” said Ben Hardaway, NCUA communications specialist. “We now use new communications channels like our monthly newsletter, NCUA Express emails, Risk Alerts, as well as press releases and social media channels like YouTube.”
NCUA's new Consumer Report Video is one example of this evolution, Hardaway explained. This series, just posted on the agency's YouTube channel last week, provides an overview of the Consumer Financial Protection Bureau's new mortgage and remittance rules that will go into effect in 2014. The video series provides a clear description of the new rules and how they will affect credit unions in an easy to use, on-demand format, he said.
The NCUA also continues to receive many legal inquiries but the regulator doesn't issue public guidance for each question it receives, Hardaway pointed out. The NCUA also posts guidance letters for those legal issues which have not previously been addressed or which have broader applicability to the industry, or both, he said.
“Formal guidance letters with legal opinions remain, and will remain, an important communications channel for NCUA, and we will continue to use them for issues that have not be been previously addressed or that have broader applicability to the industry,” Hardaway said.
The letters have always been very helpful in clarifying expectations, and when viewed in good faith, help a credit union or CUSO avoid examination issues, said Bill Beardsley, president/CEO of Michigan Business Connection LC, a business lending CUSO in Ann Arbor.
“A lot of times, the issues are cited by examiners based on their own personal beliefs and there are many instances where examiners disagree with each other, so the letters help internally as well,” Beardsley said.
Guidance letters are critical for CUSOs and credit unions because while the NCUA does not directly regulate CUSOs, the regulator does provide conditions on the ability of federally-chartered credit unions to invest in CUSOs, said Guy Messick, an attorney with Messick & Lauer PC in Media, Pa., who specializes in CUSO law.
“Credit unions must comply with the NCUA CUSO Regulations Part 712 which requires that the CUSO and the investing credit union have an agreement that gives NCUA the right to inspect the books and records of the CUSO, including those records that will enable NCUA to review the CUSO's internal controls,” Messick said.
Despite how the letters are distributed, Beardsley said the industry will continue to look to them to avoid misinterpretations.
“The NCUA guidance letters promote transparency and consistency and give good counsel to credit unions,” Beardsley said. “Without them, we're left to our own interpretations.”