OLYMPIA, Wash. — The Washington Credit Union League and the five credit unions that had requested the state Division of Credit Unions consider permitting private primary deposit insurance have now asked for a stay.
The league individually and the credit unions jointly have requested that the rulemaking process be temporarily halted in the interest of legislation changes and clarification. "While this process has been thorough and deliberative, we have come to the regrettable conclusion that legislative changes must be made to the statute under interpretation in order to produce a rule that both protects consumers and provides a reasonable framework for the operation of non-federal share insurance in Washington," the league's letter, signed by Senior Vice President and General Counsel Stacy Augustine, read.
Signing onto the credit union letter with essentially the same message were SHARE Credit Union, Prevail Credit Union, School Employees' Credit Union of Washington, Seattle Credit Union Center, and Harborstone Credit Union. "Therefore, we would respectfully request that the Department temporarily suspend the CR101 process so we can work with your staff to determine the statutory changes needed to provide DFI with the appropriate mechanism from which to reasonably evaluate an alternative share insurer," it read.
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The Washington Division of Credit Unions canceled the public meetings scheduled for Oct. 25 and Dec. 12, 2007 though comments on the most recent draft are still welcome, according to the agency's Web site (http://www.dfi.wa.gov
/cu/share_insurance_rulemaking.htm). The remainder of the schedule of events in the regulatory process read TBA–to be announced.
The authorizing section of the state law, RCW 31.12.408, allows for share insurers other than the NCUSIF. However, the insurance must be "equivalent," defined as one that: "(a) holds reserves proportionally equal to the federal share insurance program; (b) maintains adequate reserves and access to additional sources of funds through replenishment features, reinsurance, or other sources of funds; and (c) has share insurance contracts that reflect a national geographic diversity."
Augustine explained, "There are some policy decisions that need to be made and we were putting our regulator in the position of making policy decisions that we really needed to be put back before the legislature." The final rule the agency was ready to put out, which took into account comments from interested parties, "was not a rule that any share insurer could meet," she said.
According to Augustine, the national geographic diversity provision was one of the two key sticking points in moving forward with a final rule. The second was that with little guidance in the law, the rule would have required any alternative insurer to be registered with the state insurance commissioner, which did not have experience in dealing with this type of insurer.
The attorney noted that the Washington State regulator had been sued several times in recent years, highlighting the Columbia Credit Union fiasco, and was approaching this controversial rule in a conservative manor.
"The current statutory provision is one that doesn't provide a lot of guidance, literally written on a cocktail napkin," Augustine explained. This time around, there will be more forethought put into the effort.
For now, the league is going to allow the issue that has grabbed national credit union media headlines a cooling off period. Augustine said they are not going to work on introducing corrective legislation at least until 2009.
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