Consumers receive fewer financial protections from tax-exempt credit unions than they do from tax-paying banks and lose protections when credit unions acquire banks, according to a top National Credit Union Administration official.
Major Difference: According to a report from Washington Credit Union Daily, NCUA Office of Examination and Insurance Director Kelly Lay told agency Chairman Todd Harper that the different levels of consumer financial protection is a major difference between the industries.
Losing Financial Protection: In a memo as part of the NCUA’s response to a request by House Financial Services Committee Vice Chairman Rep. French Hill (R-Ark.) for information on credit union-bank acquisitions, Lay noted that the agency does not conduct separate periodic compliance examinations or assign a separate consumer compliance rating to credit unions. “Therefore, the former bank customers that are now credit union members may have less consumer financial protection oversight after the bank-to-credit union transaction,” Lay said.
Worsening Ratings: The report follows recent remarks from Harper that worsening CAMELS ratings at large, complex credit unions means “a large and growing share of the credit union system’s assets reside in institutions with potential safety-and-soundness concerns that require immediate remediation.”
ICBA Advocacy: With credit union representatives meeting with members of Congress in Washington this week, ICBA on Monday:
Released new polling data showing Americans support reforms to policies that arbitrarily favor credit unions, including 68% who say credit union customers should have the same consumer protections that banks provide, such as those provided by the Community Reinvestment Act.
Launched an ad campaign encouraging members of Congress to ask credit union officials about federal income tax subsidies and credit union acquisitions of community banks.
Noted on social media that one of the latest credit unions to acquire a community bank is not only exempt from taxation and CRA—its deposits aren’t federally insured.
Grassroots Resources: Community bankers can use ICBA’s Be Heard grassroots action center to call on their members of Congress to hold a hearing on the NCUA’s lax oversight. ICBA also encourages consumers to reach out to their members of Congress via ICBA’s “Something’s Wrong” website.
