Comment Letters Take Issue With Proposed Corporate Rule

Regulatory overreach, an unnecessary limit on credit unions' choices and possibly illegal.

Those are among the critiques of the NCUA's proposed rule on corporate credit unions contained in comment letters filed with the agency as of Jan. 26, two days before the deadline.

CUNA has “serious concerns” with several key parts, including a limit on the number of corporates a credit union can belong to and encouraging a fee to entities not federally insured, according to the comment letter written by Mary Mitchell Dunn, the association's senior vice president and deputy general counsel.

She wrote that “only when an agency is directed by statute or imminent, overarching safety and soundness concerns should it impose regulatory limitations on activities that should otherwise be determined by the marketplace.”

Mid-Atlantic Corporate Federal Credit Union President/CEO Jay Murray wrote that limiting credit unions to one corporate would eliminate the opportunity for credit unions to utilize a potentially better product from a second corporate credit union and force them to look for services outside the industry.

NASCUS Senior Vice President and General Counsel Brian Knight wrote that “state law has long controlled state-chartered credit union investments.” He added that the proposal would “encourage concentration of the natural person credit union's exposure to the corporate [credit union]. It would also limit the ability of many natural person credit unions to make business decisions to address changing needs.”

Though NAFCU hadn't filed its comment letter as of press time, Carrie Hunt, the association's senior counsel and director of regulatory affairs, said it too opposed limiting credit unions to one corporate membership.

“Credit unions should have an option to be in more than one if it fits in to their business plan,” she said.

Another source of concern was the provision that would encourage corporate credit unions to levy a fee to members that are not federally insured in order to pay for the rescue of the corporate credit union system.

Pennsylvania Credit Union Association President/CEO James McCormack wrote that privately insured credit unions and others should assist in stabilization efforts, but the NCUA's approach is “grossly inappropriate.”

Corporate America Credit Union President/CEO Thomas Bonds wrote that the proposal is “too far-reaching and does little to resolve the issue of the NCUSIF insuring the shares of non-credit unions.”

American Bankers Association Vice President and Senior Economist Keith Leggett threw cold water on the idea that such payments by non-federally insured entities would be voluntary.

“To call such a premium payment 'voluntary' is a sham. In fact, the NCUA is sending an invoice to non-FICUs and establishing a procedure to extort payments using penalties for noncompliance,” he wrote. “Non-FICUs are being conscripted into making this payment.”

CUNA's Dunn wrote that “merely labeling the assessments as 'voluntary' will not avoid the legal conflict, since the 'contributions' would be treated by NCUA and considered by those paying them as assessments, since the proposal would impose sanctions, e.g., the loss of corporate credit [union] membership, if desired payments from a non-FICU member are not made in a timely manner.”

Several comment letter writers expressed concR

egulatory overreach, an unnecessary limit on credit unions' choices and possibly illegal.

Those are among the critiques of the NCUA's proposed rule on corporate credit unions contained in comment letters filed with the agency as of Jan. 26, two days before the deadline.

CUNA has “serious concerns” with several key parts, including a limit on the number of corporates a credit union can belong to and encouraging a fee to entities not federally insured, according to the comment letter written by Mary Mitchell Dunn, the association's senior vice president and deputy general counsel.

She wrote that “only when an agency is directed by statute or imminent, overarching safety and soundness concerns should it impose regulatory limitations on activities that should otherwise be determined by the marketplace.”

Mid-Atlantic Corporate Federal Credit Union President/CEO Jay Murray wrote that limiting credit unions to one corporate would eliminate the opportunity for credit unions to utilize a potentially better product from a second corporate credit union and force them to look for services outside the industry.

NASCUS Senior Vice President and General Counsel Brian Knight wrote that “state law has long controlled state-chartered credit union investments.” He added that the proposal would “encourage concentration of the natural person credit union's exposure to the corporate [credit union]. It would also limit the ability of many natural person credit unions to make business decisions to address changing needs.”

Though NAFCU hadn't filed its comment letter as of press time, Carrie Hunt, the association's senior counsel and director of regulatory affairs, said it too opposed limiting credit unions to one corporate membership.

“Credit unions should have an option to be in more than one if it fits in to their business plan,” she said.

Another source of concern was the provision that would encourage corporate credit unions to levy a fee to members that are not federally insured in order to pay for the rescue of the corporate credit union system.

Pennsylvania Credit Union Association President/CEO James McCormack wrote that privately insured credit unions and others should assist in stabilization efforts, but the NCUA's approach is “grossly inappropriate.”

Corporate America Credit Union President/CEO Thomas Bonds wrote that the proposal is “too far-reaching and does little to resolve the issue of the NCUSIF insuring the shares of non-credit unions.”

American Bankers Association Vice President and Senior Economist Keith Leggett threw cold water on the idea that such payments by non-federally insured entities would be voluntary.

“To call such a premium payment 'voluntary' is a sham. In fact, the NCUA is sending an invoice to non-FICUs and establishing a procedure to extort payments using penalties for noncompliance,” he wrote. “Non-FICUs are being conscripted into making this payment.”

CUNA's Dunn wrote that “merely labeling the assessments as 'voluntary' will not avoid the legal conflict, since the 'contributions' would be treated by NCUA and considered by those paying them as assessments, since the proposal would impose sanctions, e.g., the loss of corporate credit [union] membership, if desired payments from a non-FICU member are not made in a timely manner.”

Several comment letter writers expressed concern about the requirement for corporate credit unions to set up enterprise risk-management committees.

Mid-Atlantic Corporate FCU's Murray wrote that under the last corporate rule issued by the NCUA, corporate credit union boards already have significant enterprise risk-management responsibilities and creating another committee would be an unneeded additional expense.

CUNA wrote that the rule, which requires the new committee to include one member who has no personal or professional relationships with the corporate credit union, doesn't distinguish between the roles of that committee and the supervisory committee.

NAFCU's Hunt said her association generally agrees with the proposal but wants clarification about whether the credit union can outsource the expert on risk management.

NASCUS' Knight wrote that the proposed requirement for corporate credit unions and CUSOs to issue combined corporate compensation disclosures could “serve as evidence to pierce the corporate veil and inadvertently expose the corporate to the liabilities of its CUSO.”

Ohio Credit Union League President/CEO Paul Mercer and General Counsel John Kozlowski wrote that “access to a corporate CUSO's records by NCUA is an attempt to expand its authority over corporate CUSOs even though NCUA has stated that CUSOs are not regulated by the NCUA.”

The NCUA's proposal to require corporate credit unions to have a more detailed disclosure of their boards' voting, including a list of how each board member voted, was criticized in the comment letters.

NAFCU's Hunt said this was an example of NCUA overreaching, and it would have the effect of focusing on the votes of individual board members, rather than the board as a single unit. ern about the requirement for corporate credit unions to set up enterprise risk-management committees.

Mid-Atlantic Corporate FCU's Murray wrote that under the last corporate rule issued by the NCUA, corporate credit union boards already have significant enterprise risk-management responsibilities and creating another committee would be an unneeded additional expense.

CUNA wrote that the rule, which requires the new committee to include one member who has no personal or professional relationships with the corporate credit union, doesn't distinguish between the roles of that committee and the supervisory committee.

NAFCU's Hunt said her association generally agrees with the proposal but wants clarification about whether the credit union can outsource the expert on risk management.

NASCUS' Knight wrote that the proposed requirement for corporate credit unions and CUSOs to issue combined corporate compensation disclosures could “serve as evidence to pierce the corporate veil and inadvertently expose the corporate to the liabilities of its CUSO.”

Ohio Credit Union League President/CEO Paul Mercer and General Counsel John Kozlowski wrote that “access to a corporate CUSO's records by NCUA is an attempt to expand its authority over corporate CUSOs even though NCUA has stated that CUSOs are not regulated by the NCUA.”

The NCUA's proposal to require corporate credit unions to have a more detailed disclosure of their boards' voting, including a list of how each board member voted, was criticized in the comment letters.

NAFCU's Hunt said this was an example of NCUA overreaching, and it would have the effect of focusing on the votes of individual board members, rather than the board as a single unit.