Rep Calls on NCUA to Delay Fund Merger, Increase in Operating Level
A key Republican House member is asking the NCUA to delay proposals to increase its normal operating level and merge its corporate credit union stabilization fund and its share insurance fund.
“Merging the funds and raising the [operating level] would seem contrary to the intent of Congress when the [stabilization fund] was created,” Rep. Sean Duffy (R-Wis.), chairman of the House Financial Services’ Housing and Insurance Subcommittee.
The NCUA has solicited comments on a plan to close the stabilization fund in September; that could result in a Share Insurance Fund distribution to federally insured credit unions of between $600 and $800 million. The stabilization fund had been scheduled to close in 2021.
At the same time, the NCUA board agreed to seek comment on a plan to increase the normal operating level of the Share Insurance Fund from 1.30% to 1.39%.
But Duffy said in a letter to the NCUA board that credit union officials are saying that the agency has not made a justifiable case for increasing its normal operating level “other than an NCUA created issue by merging the [corporate fund] into the [insurance] fund.”
Duffy said he is concerned that under the proposal, federally insured credit unions would receive only a small portion of the $4.8 billion in assessments they have paid since 2010.
In addition, he said, the agency has spent more than $1 billion in legal fees in order to recover funds lost as a result of the failure of the corporate credit unions.
NCUA Chairman J. Mark McWatters has said he and board member Rick Metsger were not parties to the contracts that resulted in large contingency legal funds, but that efforts to renegotiate those contracts have failed.
Duffy asked the board to withdraw or amend the plan to ensure that federally insured credit unions receive the maximum amount possible. And he asked the board to delay increasing the normal operating level until Congress has a chance to review the proposal.
But NCUA officials have said that the board will have to decide about the merger and operating level soon in order to provide credit unions with a rebate this year.
An NCUA spokesman said Monday that the agency is reviewing Duffy’s letter.
However, Metsger told those attending the NAFCU Congressional Caucus last week that the funds might have to be merged to avoid credit unions having to pay an assessment shortly.
Credit union trade groups have split on closing the stabilization fund. CUNA has endorsed the proposal, while NAFCU has said that additional research is needed before the merger takes place.