Home-Based Issues Require Policy, Not Rule
The NCUA's recently proposed Home-Based Credit Union Rule, 12 CFR, Part 701, Requirements for Contacts with Federal Credit Unions, has drawn strong criticism from credit unions across the country raising the same concerns I stated when I voted against the proposal at the December 2013 NCUA Board Meeting.
The proposed rule tries to accomplish two things:
It moves an examination of a home-based credit union offsite to better aid in the safety of examiners by removing them from private residences. Poor and unsafe working conditions were cited during the board meeting as reasons the rule is necessary.
It requires all home-based credit unions to acquire commercial space within two years.
The first initiative is based on examiner safety but limited to federally chartered credit unions only. There are 93 home-based credit unions. Of that number 80 are federally chartered and 13 are state chartered, federally insured. It is believed that an examiner, working alone, could be subject to personal jeopardy if other people are not around.
The second initiative is based on the unfounded belief that member access is limited at a home-based credit union, there is a lack of ability to reach them because of no phone or internet access, and because they are home based there is no potential for growth.
So, as most government agencies do, NCUA looked toward a rule to cure the problems they perceived. And again, as government agencies sometimes do, they went, I believe, a little too far.
The good thing: It is a proposed rule and can be changed, corrected or left to fade away. An even better thing is that I believe we can solve the NCUA's concerns in a way that there would be no harm and therefore no foul.
If examiner safety is truly a concern it needs to be addressed immediately, as we would not want any of our examination force to be working in unsafe conditions. I believe the best way to address this, without implementing a rule, is to implement a policy stating that all home-based credit union examinations must be conducted with two examiners present. This should allow the exam to be completed in half the time and without a significant increase in cost.
The policy should extend to all federally insured credit unions. If it is safety we are concerned about then it needs to extend across the board. I am confident we can have a constructive dialogue with our state supervisory authorities on this issue.
On the issue of requiring commercial space, the NCUA applies the law and all regulations equally and fairly whether a credit union is home based or commercially located. If a credit union is operating in a safe and sound manner, within the limits of the law, the location it operates out of should not be an issue.
It is troubling to me that instead of exploring alternate means to address examiner safety directly we are using that issue to force credit unions into a commercial space. If this rule passes, requiring commercial space for home-based credit unions, then the landscape of how this industry was created is gone forever. Is a regulator supposed to be in the business of running credit unions?
Shouldn't we focus on the safety and soundness issues we are charged with instead of trying to overregulate, as I feel we have done with this proposed rule?
Michael Fryzel is a member of the NCUA Board. He can be reached at 703-518-6307 or firstname.lastname@example.org.