ALEXANDRIA, Va.-NCUA decided to work with the Office of Management and Budget rather than engage in a turf war after OMB waved a red flag at the agency's recent announcement that it would begin collecting information from credit unions on their service to members of modest means and CEO compensation. The next business day after NCUA announced it would be collecting the information, a spokesman from the OMB told Reuters news service that the agency would be reviewing whether NCUA's Letter to Federal Credit Unions 06-FCU-02 should have been cleared by OMB first under its U.S. Paperwork Reduction Act responsibilities. The letter explained to federal credit unions that the agency was launching a pilot program to document credit union service to their entire fields of membership, including those of modest means, and CEO compensation and benefits. While acknowledging the Ways & Means Committee did not demand that NCUA collect the data, NCUA Director of External Affairs Nicholas Owens initially told Reuters news service, "the agency takes the concerns seriously and therefore is initiating this collection method." The Letter to Federal Credit Unions said that as the agency goes through the process, the agency may decide it needs to collect additional or different information, which would make it "necessary to coordinate" with OMB. However, NCUA had a change of heart. "After further discussions with the OMB," Owens told Credit Union Times, "and in order to keep this process moving forward, the agency is pleased to seek a review of the planned pilot initiative to collect the data for purposes under the Paperwork Reduction Act." He continued, "The agency's working group was able to develop a plan to obtain quantifiable data while not placing burdens on the credit unions. This initiative is certainly within the spirit of the Paperwork Reduction Act. NCUA appreciates the opportunity to work with OMB on this initiative." CUNA General Counsel Eric Richard said whether OMB should have been consulted or not "seems to be a debatable issue." He pointed out that there has been a "decades-old" turf war between the regulators generally-not just NCUA-and OMB on whether the White House watchdog should review the examination processes. Dj vu This is not the first time NCUA action has been brought to the attention of OMB. NAFCU sent a letter Nov. 2, 2000 (See CU Times, Nov. 15, 2000 issue, page 2) to the OMB requesting the agency take a second look at NCUA's final field of membership rule when the community action plan (CAP) was imposed; the trade association argued then that the final rule was "substantially" different from the proposal and therefore OMB should review it a second time. The CAP was to require all community chartered credit unions and those applying to convert to explain how they planned to serve their entire fields of membership. NAFCU President and CEO Fred Becker formerly served as a military advisor at OMB while a judge advocate general. NCUA's data collection plan seems to have left a bad taste in NAFCU's mouth too, which questioned the usefulness of the information to be collected. "NAFCU believes it is very important for credit unions to be able to demonstrate their success in reaching out to the underserved. The data collection program that NCUA announced today, to the extent it is intended to provide a profile of credit union membership, unfortunately may not accomplish that objective," the trade group said. "In particular, it is questionable whether the data collected will provide a meaningful assessment of credit union service by income level. AIRES share and loan data may not adequately capture actual member income, providing an incomplete picture of credit union membership." In the face of congressional pressure and recommendations in a nearly three-year-old Government Accountability Office report, NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt said this is not the way to address the transparency issue. "We felt as though it was important for our members to recognize there are some problems," she said. CUNA chose a different tact; president and CEO Dan Mica noted that corporate and lobbying scandals have steered lawmakers in favor of disclosure. "Further," he said, "a number of members of Congress, including Chairman Bill Thomas of the House Ways and Means Committee, have made it clear that credit unions, in order to show their tax exemption remains valid, must be ready to exhibit accountability, transparency and verifiability. In this environment, CUNA understands the necessity of this effort by NCUA and believes there should be reasonable cooperation by credit unions with the agency to provide information. In the meantime, CUNA is working for solutions that address the needs of Congress, the regulator and credit unions on this issue." CUNA Chief Economist Bill Hampel explained that the trade association would continue to work with NCUA to enhance the collection effort. "We're going to encourage them to collect enough information to address the topic," he said. He stressed that some information just will not be available. For example, low-income credit union members get a better deal proportionately than upper income members. However, Hampel said, "There's no way for a credit union to know that within their own data set." Expanding upon that point, CUNA Associate General Counsel Mary Dunn added that life improvements of members that credit unions have helped that put them above the `modest means' category "may not be reflected in any statistical data." "Credit unions do a great job of serving their members. [Quantifying] it is a difficult task. It's not one that NCUA assigned itself," she stated. CUNA will be encouraging credit unions to provide their examiners information beyond the basics to help fill in the details, according to Dunn. The Process NCUA is not making the examiner questionnaire public at this time, according to Owens. However, according to NCUA's letter, beginning at the end of February the agency will first attempt to profile a credit union's membership. "This will enable the agency to better assess how credit unions are serving all their members, particularly those who may be considered members of modest means in relation to the credit unions' authorized limited fields of membership," it read. NCUA's Letter to Federal Credit Unions 06-FCU-02 continued, "If your credit union is selected for an on-site visit, an examiner will review loan files, analyze information contained in your AIRES share and loan download, and briefly discuss the types of services provided to your membership. As with all examination and supervision visits, the confidentiality of member information will be protected." The agency will also be gathering information on senior management compensation and benefits packages. The data will be collected from 481 randomly selected, but statistically valid, federal credit unions to evaluate the extent and types of services offered, member income distribution, the reliability and value of this preliminary data, and executive compensation and benefits. "It is important to note, that while the information collected is statistically valid for all federal credit unions, it is not statistically valid for the different types of charters," the letter explained. The agency also said that the collection of the new data should have "minimal impact" on the credit unions selected to participate. NCUA is trying to coordinate the visits with regularly scheduled on-site exams; the specially trained examiner will be there for about two days, but the agency hopes to cut that back in time. "This is an important endeavor and the agency takes its responsibilities seriously," NCUA Chairman JoAnn Johnson said at the time of the announcement. NCUA Director of Public and Congressional Affairs John McKechnie relayed that a senior Republican staffer on the Ways & Means Committee told him "Chairman Thomas and his staff are aware of the data collection process and that it shows our resolve." Obviously, he said, they withheld a final judgment though until they see what the effort yields. Chairman Johnson, who testified before the Ways & Means Committee Nov. 3 when the issue erupted, said, "I have always believed that America's credit unions are meeting their mission in serving persons of modest means and are a provider of affordable financial services. This will be an opportunity for the not-for-profit financial cooperatives to demonstrate with quantifiable data, the good work they are doing for Americans from all walks of life." Agency examiners have already been trained on the data collection, she emphasized. Owens added, "We are pleased that NCUA's plan will allow for gathering data without burdensome surveys and unnecessary forms. Through the examination and supervision process, the agency can ascertain information utilizing the normal methods and procedures." NCUA anticipates the process taking no more than two days on-site. "The on-site visit will not result in conclusions about individual federal credit unions nor will data be classified as favorable or unfavorable," the agency emphasized in the Q&A attached to the letter. "Credit unions have unique fields of membership and NCUA has not established criteria for evaluating the preliminary data. Examiners tasked with collecting information have been instructed not to compare or share data collected from multiple credit unions or to make personal judgments about this data. At this time, you will not be provided a copy of the data collected." The Voice of Experience NCUA has worked with NASCUS in the development of its data collection plan, according to NASCUS President and CEO Mary Martha Fortney. NASCUS, which represents both state chartered credit unions and their state regulatory agencies, is surveying its members to find out whether they have implemented or are considering similar data collection measures across the states. "NASCUS facilitated information sharing between the NCUA and Connecticut and Massachusetts state regulators, who oversee Community Reinvestment Act programs in those states," Fortney said. She continued, "We believe this specific request of NCUA from Congress and the GAO involves only federal credit unions' service to members. Applicability of the project or any implications of documentation for state-chartered credit unions are unknown at this time." Still, Fortney said the issue will be up for discussion at NASCUS Board meetings, as well as the Credit Union Advisory Council Board and the NASCUS Legislative and Regulatory Affairs Committee at the end of February. The implication from the November Ways & Means Committee hearing was if credit unions cannot show their service to those of modest means the committee could take a second look at the credit union's federal tax-exemption, which would affect federal and state charters alike. Process, Not Ending Point This data collection is merely a beginning and more and different information may need to be gathered, according to NCUA's letter. "As the information is aggregated, it is likely NCUA will determine that additional or different data should be collected from a larger number of credit unions to allow for a valid statistical analysis and discussion of member service by charter type," it said. "If the collection of data is expanded to a broader base, it will provide the opportunity to more fully address many of the issues that have been raised, such as the possible distinction between credit unions due to different charter types, geographic locations, and fields of membership." To start with, though, examiners will be reviewing selected loan files and as the survey progresses, focus will shift to analysis of the AIRES share and loan download and discussion with management. This shift should also mean less exam time. NCUA also said it looked forward to receiving comments from the credit union community on the data collection. -

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