In the report, Federal Financial Analytics contends that:

The NCUA's definition of "low income" is flawed since it defines a "low income" person as anyone with a family income below the greater of 80% of the relevant area or the national median. Most methodologies define "low income" as those with incomes below 50% of the applicable median, the firm said.
The NCUA allows credit unions to serve a "far wider swath" of households even when specific benefits are supposed to be targeted to low-income families.
The common bond of membership has largely disappeared, as "credit unions serve large communities of borrowers with little affinity to each other and ample alternative financial providers." The NCUA has attempted to expand the definition of common bond, the company said.
Credit unions appear to lend to disproportionately higher-income households in low-income areas and to deny credit to a greater proportion of African American borrowers.
Policymakers could consider whether credit unions should be more closely monitored to determine whether they are fulfilling their missions.
There is little outside oversight of the NCUA, since it is self-funded, without any cabinet agency having authority over it.
Had the NCUA's capital Prompt Corrective Action been "more robust" during the financial crisis, fewer credit unions might have failed. "The GAO also found that the NCUA acted too slowly or sometimes not at all to prevent costly credit union failures," the report stated
The NCUA has not put into effect the required Risk-Based Capital Rule and the proposed regulation and judges asset risk very differently from the one used for banks.

The study suggests that policymakers could consider examining NCUA safety and soundness regulation to ensure that credit union management, not members or taxpayers are responsible for effective internal controls, disciplined earnings objectives and mission compliance.

Instant Insights /

ABA-Funded Study Accuses Credit Unions of Abandoning Their Missions

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