This year is a milestone time for the state credit union system. One hundred years ago, Massachusetts passed the first state credit union act creating an example for state chartering across the country.
By 1925, 26 states had enacted credit union laws, and 176 state credit unions had been chartered. In 1934, when the Federal Credit Union Act was signed and credit union dual chartering began, 42 states had enacted legislation to authorize state credit unions. By that point, more than 2,500 state credit unions had been chartered in the U.S. Today 3,100 state-chartered credit unions represent nearly 40% of the nation's credit unions.
This week in Boston, NASCUS' annual State System Summit will honor the state credit union's great 100-year history. The NASCUS Summit is the one opportunity for state regulators and credit union executives to determine how the state credit union system can continue to thrive for the next century and tackle today's legislative, regulatory and operational challenges. There are more than enough topics to discuss, starting with regulatory reform.
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Since the inauguration of President Obama, the financial services community has awaited the administration's recommendations for regulatory reform. The state system is in a good position within the framework of the president's regulatory reform recommendations, released on June 17. The president's recommendations reaffirm the states' role in regulatory supervision and retain credit union dual chartering as well as an independent credit union regulator. However, now Congress will take President Obama's recommendations and shape legislation, which may or may not include his recommendations. House Financial Services Committee Chairman Barney Frank (D-Mass.) is confident that regulatory reform legislation will pass the House by the end of summer and will be considered by the Senate this fall.
NASCUS' job now, as it always has been, is to ensure that Congress acts on legislation that is beneficial for the state credit union system and for state regulators. As Congress debates regulatory reform, our goal is to make certain Congress understands that it is essential that the president's intent regarding dual chartering is affirmed. We will continue to work with the House Financial Services Committee and the Senate Banking, Housing and Urban Affairs Committee to ensure the state system is represented and recognized. We will also pay close attention to new legislation and regulation to make sure that credit unions are not swept into reforms that are intended to curb abuses not practiced by credit unions, such as executive compensation excesses or risky mortgage lending.
Enhancing consumer protection is among the issues emphasized as part of the regulatory reform efforts. This week, the state credit union system will continue to discuss how the proposed Consumer Financial Protection Agency would impact states' rulemaking, enforcement and examination practices for consumer protection. The states have traditionally been in the front line of consumer protection standards, and it will be important to maintain that authority. It will also be necessary to answer many unresolved issues regarding the proposed agency, such as preemption, funding, assessments, examination authority and rulemaking procedures.
As regulators and credit unions respond to regulatory and legislative changes in the coming months, let's continue to value the innovations and regulatory solutions that can be developed at the state level and applied throughout the entire credit union system. During this economic crisis, individual states have developed best practices and innovative solutions to help their credit unions and members get through this tough time. NASCUS has acted as a conduit for sharing solutions among the states, encouraging the information exchange on what works best. This emphasis on innovation, sound regulation and best practices is one of the primary strengths of the state credit union system. As we move forward, we must continue to build on these strengths and the innovative thinking that created the credit union movement in the first place.
While the challenges are great, NASCUS is confident that the state system will continue to thrive. NASCUS and state regulators are proud of the advancements that credit unions have made in the last 100 years. We remain confident of the ongoing ability of the states to take a forward-thinking approach to ensuring the future success of the credit union system through innovation and an unwavering emphasis on safety and soundness.
NASCUS, state regulators and state credit unions will continue to be very involved in the discussions of the day, including regulatory restructuring, consumer protection and capital reform. Credit unions have an incredible history of success in the face of challenges and adversity. NASCUS will continue to work in partnership with state regulators and the credit union community to ensure safety and soundness, as well as continued success.
Mary Martha Fortney is president/CEO of NASCUS. She can be reached at 703-528-8351 or [email protected]
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