NCUA board members call for reforming de novo process

Two members of the National Credit Union Administration board on Wednesday called for the agency to make it easier to start new credit unions.

“There has got to be an easier path for de novo credit unions,” NCUA Vice Chairman Kyle Hauptman said during the Credit Union National Association’s online Governmental Affairs Conference, his first public remarks since joining the board last year. “I’m from Maine, and I was pleased to hear about a new credit union chartered in my home state just last year— until I learned it took nine years to accomplish. Nine. Things may move a bit slowly in Maine, sure, but not that slowly. Self-reliant, accountable people who want to work cooperatively with others to charter a new credit union that they will own deserve a clear path to make that a reality.”

NCUA Vice Chairman Kyle Hauptman, speaking during CUNA’s online Governmental Affairs Conference

That was echoed by board member and former Chairman Rodney Hood, who spoke earlier in the day. Hood noted that NCUA chartered just one credit union in 2020 and only two are planned for this year.

“These data are, quite frankly, unacceptable,” he said. “The agency can make it incredibly difficult to get a new charter. We aren’t saying chartering a credit union should be easy, but it shouldn’t feel impossible for many organizing groups.”

He added, “a system with almost no new startups is not sustainable.”

Only 15 new credit unions have been chartered since 2014, while hundreds of credit unions close their doors each year as the result of mergers. The number of de novos is also expected to remain low in the aftermath of the pandemic. The agency has attempted to ease the chartering process in recent years, including in 2019, shortly after Hood and current Chairman Todd Harper joined the board, though little has been done since then and the process generally still takes years.

Hauptman also suggested in his remarks that fixing the de novo process could help the industry advance its efforts at diversity, equity and inclusion by actually reaching underserved consumers and not just talking about it.

In remarks earlier in the conference, Harper – who did not address de novo issues – once again called for the agency to do more around consumer protection. He noted that exam audits had shown “several issues suggesting that some credit unions may not be paying attention to consumer financial protection as closely as warranted.”

Hauptman, who in the past has been a vigorous opponent of the Dodd-Frank Act, pushed back against that in his remarks.

“The best consumer protection has always been vigorous competition, allowing American businesses to do what they do best: innovating to find ways to give consumers a better choice, a better product at a lower price,” he said. “Thus, it’s impossible to protect consumers without first examining if the NCUA’s regulations inhibit credit unions from better serving their members. Credit unions can’t deal with every issue by just snapping their fingers and hiring more people, and it would be unfair and counterproductive if the NCUA dealt with problems that way.”

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