While the NCUA board passed all of the items on its Nov. 19agenda, only the field of membership proposal received nods fromall three members.

Despite the progress made during the board meeting, snarkycomments and innuendoes made it an unforgettable one, as anexchange between NCUA Chairman Debbie Matz and Board Member MarkMcWatters turned heated and accusatory.

After the staff presented the 2016/2017 operating and capital budget, McWatters read a lengthystatement that called into question the validity that the NCUA'sbudget started at zero and was built up from there. He alsoquestioned the efficacy of waiting to implement an 18-monthexamination cycle until after the risk-based capital rule goes intoeffect. McWatters added the NCUA should reduce its budget andimprove budget process transparency.

In addition, he said the board failed to engage its members in adialogue about the budget process.

“The NCUA can and should reduce the operating budget and improveits budget process,” McWatters said during the conclusion of hisstatement. He also called the agency's efforts to fund itsoperations “misguided.”

NCUA Vice Chairman Rick Metsger later attempted to clarify thatthe board never actually had a budget hearing and instead held abudget briefing. 

After McWatters' statement, Matz said, “There's so muchmisinformation in that statement, I won't even attempt to refuteall of it.”

She said McWatters' claim that the agency is “shutting the door”on an 18-month cycle is erroneous.

“We are looking at an extraordinary amount of reg relief, it'sinappropriate and irresponsible to do reg relief and increase ourexam cycle,” she added.

The heated exchange continued when Matz said, “It's ratherextraordinary to be accused of manipulating our exam hours toinfluence the OTR. I have to say I am not totally shocked by that,for questioning the integrity of the agency.”

“I didn't say that,” McWatters said.

“Yes, you did, by inference,” Matz said.

Matz also said McWatters' discussion on dialog with the board isa result of his lack of participation on the board.

“It's interesting that you set yourself up as the spokesman forthe credit unions,” Matz interjected.

Matz later told McWatters that he does not attempt to understandthe issues, how the examination process works, or why some of theagency's decisions are made in the interest of safety andsoundness.

“Any board member who wants information from the staff, you willget it,” Matz said. “You might not agree with it, but you will getas much information as you want, on any subject that you want. Andclearly some of the things said here today, without a doubt, youhave no understanding about some of the issues that you arecriticizing.”

Trade groups also criticized the budget process in statements released after themeeting. Dan Berger, president/CEO for NAFCU, said, “The agency hasnot held a public hearing on its budget in six years, and creditunions deserve the chance to be a part of the process that theyultimately fund.”

CUNA also expressed concern that the NCUA increased its budgetfor the ninth year in a row. Jim Nussle, president/CEO for CUNA,said in a statement, “We believe the agency needs to monitor andmodernize resources to maximize funds and contain costs.”

While the budget ultimately passed by a two-to-one vote, withMcWatters voting against it, the field of membership proposal movedforward with all three board members voting in favor of it.

In her opening statement on FOM, Matz said, “[I]t's clear thatthe federal charters need a rule that is more permissive than anyrule we've approved in the past, yet stays within our statutoryauthority.”

While he voted for the FOM proposal, McWatters cautioned, amongother things, that the proposed rule does not address whetherInternet communities may establish their own credit unions or beincorporated into existing credit unions.

Incoming American Bankers Association President/CEO Rob Nicholspreviously blasted the proposed changes in a letter penned to Matz.In the Nov. 18 letter, he said the proposal steps outside thebounds laid out by Congress and allows credit unions to move evenfurther away from the narrow common bonds that define theirmission.

Nichols' letter prompted credit union trade groups to rebut; inresponse, Berger said NAFCU was disappointed the ABA chose toattack the proposal before it was released and details wereknown.

In the same vein, Brad Thaler, vice president of legislativeaffairs for NAFCU, had strong words for bankers attacking creditunions. He said in a Nov. 20 statement that bankers “should havepaid this much attention to their own members and actions prior tothe financial crisis.”

Despite his criticism toward bankers, he called forcollaboration between the two groups to seek regulatory relief andbetter data security.

“We would prefer to work together with them to bring aboutreforms that will help both of our members,” he added. “We hope thebankers will focus on these meaningful efforts with us.”

Included in the proposed field of membership rule, among otherthings, is a modification to the definition of service facility formultiple common bond credit unions to include a transactionalwebsite or mobile platform that, at a minimum, accepts deposits orloan applications, or disperses loans.

The rule would also grant FOM regulatory relief to statechartered credit unions.

The rule didn't propose expanding the community charter corearea population limit beyond 2.5 million. However, the plan wouldexpand the rural district population limit to one million,regardless of the state in which the majority of the district'spopulation is located.

Berger applauded the changes in a statement.

“As commerce and consumer behavior continue to rapidly evolvewith innovative technologies, we are pleased to see that the agencylistened to our member credit unions' suggestions on how to keeppace with today's marketplace,” he said.

Similarly, Nussle called the proposed changes “sensible” in apress release. He said the rule “stays within the confines of theFederal Credit Union Act all while ensuring American consumers areallowed more options when choosing their financial serviceprovider.”

Dennis Dollar, former NCUA chairman and principal partner forDollar Associates, told CU Times some credit unions willbe disappointed by some of the items left in place.

“…[T]hey left in place the arbitrary population caps for MSAcommunities and, even though they increased them, for ruraldistricts,” Dollar said. “They could have gone further under thestatute in these areas and several others such as allowingreasonable proximity for physical presence in an underservedarea.”

While a 73.1% overhead transfer rate increase was approved, thetransfer of authority to set the rate drew criticism from NASCUSCEO Lucy Ito. In a press release, she said the NCUA is “foregoingresponsibility for safety and soundness as the charterer of federalcredit unions” by shifting “virtually all” safety andsoundness-related expenses to the share insurance fund overheadrate.

She added that once the issue is published to the FederalRegister in January, public comments may provide a clear picture asto “how and why the agency assigns all safety and soundnessexpenses to the OTR.”

Both Nussle and Berger urged the agency to move back to an18-month examination cycle for low-risk credit unions. Matz said inthe meeting that she would consider looking at the issue next year.McWatters, however, questioned why the agency must wait to offeradditional regulatory relief instead of looking at the issuenow.