ARLINGTON, Va. — NASCUS President/CEO Mary Martha Fortney has a couple of pet peeves. Perhaps the more minor one is referring to NASCUS as a trade association. NASCUS represents state credit union regulators, but has a credit union advisory council with some state leagues as “benefactor” members. NASCUS represents its regulators though their interests sometimes coincide with credit union concerns. NASCUS provides a forum for its members to discuss ideas and problems and serves as a resource. Second, Fortney is fed up with publications and other sources that refer to laws and regulations applying to credit unions without distinguishing when it applies to federal credit unions, federally insured credit unions, or all credit unions. “We try to keep that in mind as we communicate with our members about things that affect them, because, some of the rules can be confusing, so we try to act as a resource,” NASCUS Director of Communications Kate Hartig chimed in. Fortney is hoping NCUA will segregate all of its regulations that cover federally insured state chartered credit unions from what only applies to federal credit unions to help clear up some of the confusion.

NASCUS is also being proactive in getting its name and issues out there for greater clarity. The group is looking to increase its visibility within the state and federal systems. NASCUS is a member of the Financial and Banking Information Infrastructure Committee; a standing member of the Federal Financial Institutions Examination Council state liaison committee, which was recently granted a vote for the committee chairman; works with the Financial Crimes Enforcement Network and the Office of Foreign Assets Control; and has served as a resource to Congress on unfunded mandates. At the state level, NASCUS is working to bolster its presence at the National Conference of State Legislators and by working with the National Governors Association and the National Association of Insurance Commissioners. The organization also penned a joint letter to Congress on data security with the Conference of State Banking Supervisors.

One issue that is equally important to federal and state regulators and federal and state chartered credit unions is Bank Secrecy Act compliance. “Regulatory compliance continues to present a challenge for credit unions and for state agencies,” Vice President of Regulatory Affairs Brian Knight, just returned from speaking at a joint NASCUS/CUNA conference on BSA compliance, commented. “Obviously BSA is not going away.”

However, Knight feels the state regulators, and therefore credit unions, have an edge in the area of BSA. He pointed out that many state regulators, particularly those with combined banking and credit union departments, have more experience with BSA because of the bank side of their business. “It is impressive the extent to which credit unions have come up to speed…To the extent NASCUS helps credit unions come up to speed, we will continue to provide forums for credit unions to get their questions answered.” NASCUS Educates

As part of its duties to inform its membership, NASCUS hosts Webinars every month. “Most times the topics come from our members,” Hartig explained.

Between the Webinars and on-site events, NASCUS Director of Education, Programs, and Events Jennifer Champagne said top issues like BSA, the unrelated business income tax, information technology, and member business lending all get covered. Fortney noted that the IRS has not ruled on UBIT yet and NASCUS has no secret formula, but bases its course on what NASCUS thinks will happen. NASCUS serves on the UBIT steering committee too. “We'll probably be talking about it for a while still,” she said.

All this educating is for the good of all NASCUS members. “One of the best ways to benefit state charters is we'll educate their examiners. We feel like an educated and strong examiner is obviously a benefit to credit unions,” Champagne said. She added that NASCUS works with NCUA as well on examiner training.

NASCUS also boasts an accreditation program. Currently, 28 states are accredited representing 83% of the assets of state charters, according to Vice President of Accreditation and Corporate Affairs Barbara Pogue. Accreditation of a regulatory agency takes about three to four months of extensive documentation, on-site reviews, monitoring, and self-evaluation and is good for five years, subject to annual reports, she explained.

“I think it has the support of the industry because,” Pogue said, “we talk about the benefits to the agency that's going through this accreditation process, but it also I think benefits the credit unions and their members that the state regulator is willing to make that commitment to ensure that they, as an agency, adhere to these best practices and go through the process of demonstrating and maintaining.”

Additionally, NASCUS will hold its State System Summit Aug. 9-11 in Ft. Lauderdale, Fla. this year. Champagne explained, “One of NASCUS' jobs is to provide a forum for state regulators and credit unions to get together and discuss issues that concern them both.”

Another legislative issue of concern to all in credit unions is federal regulatory relief legislation. The law enacted last year, NASCUS Executive Vice President of Government Relations Sandra Troutman said, “We call it reg relief-lite. We hope that something more extensive is introduced next year.” She said NASCUS was “pleased with the state authority over disclosures for privately insured [credit unions]. That's something we've been advocating for a while.”

However, a key issue for the states is increasing the member business lending limit that was not included in the final version. Fortney noted that seven states have their own business lending rules for credit unions. “It's an example of allowing distinctions between the state and federal systems,” Fortney highlighted. “When you say 'what's the value of dual chartering,' member business lending is just a prime example…It sounds so trite to say that the states are the laboratory of innovation but they really are.”

State charters would not be affected by the risk-based capital reform provision in the Credit Union Regulatory Improvements Act since the states have their own capital rules. However, the big issue for NASCUS is secondary capital, which was introduced as legislation in the 108th Congress by Congressman Brad Sherman (D-Calif.), but did not see the 109th Congress and Fortney does not expect to see it resurface in the 110th. “It's probably a long shot because there's no unanimity in the system,” she said, noting philosophical differences and concern for the federal tax-exemption.

The Department of Defense reauthorization bill, which included a 36% cap on lending to military personnel, is another federal law that has NASCUS on the look out. “We're concerned about that because potentially credit card products could be impacted by that. It depends what fees they include in the interest rate calculation,” Troutman explained. “But, saying all of that, we are very supportive, NASCUS, of fairness for military personnel.”

Fortney followed up, “What are the unintended consequences? That is something Congress doesn't always have quite a handle on.” There is no state representation for the required consultation with the financial institutions regulators, but NASCUS is working on that and is drafting a letter to DoD. The group has had a history in other federal laws such as H.R. 1151. “I think NCUA understands and sees the value of the dialogue regulator to regulator,” Fortney stated.

While NASCUS' official position is 'we don't write tax policy,' it also received a request from then-Ways and Means Committee Chairman Bill Thomas (R-Calif.) to collect data on service to members of modest means. NASCUS is looking at 502 samples and pointed out that 40% of the credit unions were not represented in NCUA's data collection of solely federal credit unions. Troutman added that NASCUS does not have the authority to mandate a completion date, but all the states have been “extremely cooperative.” Fortney said she hopes to have the results out by the end of the first quarter.

The dual chartering system is not only healthy, but credit unions prefer it, according to Fortney. “I have to say, I can't remember a conversation where a state credit union asked us for federal preemption,” she stated. “They want to go to their state regulator.

“Where they have tension is when they feel there's overreach by the regulator–the NCUA–acting as regulator and not as insurer.” Fortney emphasized that House Financial Services Committee Chairman Barney Frank (D-Mass.) has said he will be looking at federal regulatory preemptions, always a big issue with NASCUS.

She added that NASCUS is pleased to see NCUA has a full board and has an excellent working relationship with NCUA Board liaison Board Member Gigi Hyland. Fortney pointed out that there are a number of public and private opportunities for meetings between the federal regulator and the state group, including at the regional and, starting again this year, at the national levels with its membership.

“The credit union system can only be enhanced by greater communication between the state and federal regulators,” Troutman said.

Credit union conversions to mutual savings banks is another area that NASCUS would like to keep under state regulators' purview; Fortney noted that some states do not permit conversions at all.

NASCUS' Knight said he expects conversations on the philosophical issues of conversions for some time to come regarding fiduciary duty and due diligence, particularly after public battles like those at Columbia Credit Union and the atypical situation where Nationwide Bank purchased Nationwide Federal Credit Union. –[email protected]