CUNA Comment Letter
Proposed Changes to 12 CFR Part 708b
September 27, 2004
Ms. Mary Rupp
Secretary to the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Dear Ms. Rupp:
On behalf of the Credit Union National Association, I appreciate the opportunity to present our views on the National Credit Union Administrations proposal, Mergers of Federally-Insured Credit Unions; Voluntary Termination or Conversion of Insured Status, 12 CFR Part 708b, which appeared in the Federal Register Thursday, July 29, 2004. CUNA is the largest national trade association serving credit unions; the association represents approximately 90% of the countrys 9,300 state and federal credit unions.
Summary of CUNAs Views
- CUNA has a number of concerns with the current proposal and does not support it.
- CUNA supports the option for state governments to decide for themselves whether to permit their credit unions to operate with private share insurance. CUNA is concerned that questions have arisen regarding the role of state regulators under the proposal and its uncertain impact on the dual chartering system for credit unions.
- The proposal would require new disclosures regarding private insurance. CUNA has a longstanding policy to advocate full, fair, and timely disclosures to members, including ones on private insurance. However, NCUA did not address specific abuses in the supplementary information accompanying the proposal, leaving credit unions to question the need for new disclosures.
- CUNA is also concerned that the proposal, if adopted, could result in unbalanced disclosures due to the fact that information that is in addition to NCUAs required disclosures, such as descriptions of private insurance, would have to be preapproved by an NCUA regional office.
- More specifically, the proposal does not provide for a review process if there is a disagreement between NCUA and a credit union or between NCUA and the state regulator regarding the accuracy of the content of additional disclosures. Also, there are no parameters in the proposal as to how long regional offices may take to review additional disclosure materials.
- The supplementary information does not cite any abuses in the voting process yet would impose costly and burdensome new requirements on credit unions regarding the voting process. In the absence of such abuses, extraordinary changes of this nature, which remove the election process from the credit unions board and management, are inconsistent with the agencys posture on regulatory relief as well as its general approach to regulation, and should not be adopted.
- The proposal would require the use of an independent third party to administer the member vote. The proposal leaves unclear the role of the credit unions board, supervisory committee or other internal credit union body, which would otherwise have overseen the vote.
Discussion of CUNAs Views
CUNAs comments were developed after extensive discussions and deliberations. Our Examination and Supervision Subcommittee held two recent conference calls and an in-person meeting focusing on this proposal. As part of its review, the Subcommittee met with NCUA Board Chairman JoAnn Johnson and Board Member Debbie Matz, and appreciated the opportunity to discuss the proposal.
The outcome of the Subcommittees work on the proposal was to recommend CUNA not support it. CUNAs Governmental Affairs Committee also reviewed the proposal and did not support it, based on concerns discussed below.
Concerns about Role of State Regulators
As part of its Renaissance Commission report, CUNA restated its support for state governments to have the authority to decide for themselves whether to permit their credit unions to operate with private share insurance. In such states, the option for private insurance is an important vestige of dual chartering. CUNA is concerned that the proposal does not indicate what role NCUA envisions for state regulators beyond approval of member notices under 12 CFR 708b.205, and how NCUA would work with state regulators when a state chartered, federally insured credit unions share insurance is converted to private insurance.
Concerns about Imbalance in Disclosure Process
CUNA consistently supports the rights of members to receive full, fair and timely disclosures about their credit union and their accounts including balanced disclosures regarding private insurance.
One concern raised by our policymakers is that while the proposal would allow information, in addition to that which NCUA prescribes, to be included in communications to members, all such additional information provided during the voting period would have to be preapproved by the NCUA regional office.
As provided under the proposal, the Regional Director may withhold approval of such modifications or additions if he or she determines that the credit union, by inclusion or omission of information, would materially mislead or misinform its membership. While the goal of NCUAs review is to ensure accuracy, an objective CUNA supports, there is a concern that the language of the proposal would give NCUA considerable latitude to preclude information about private insurance.
In any event, the proposal does not address a process under which a credit union could appeal if there is a disagreement between it and the regional office or between NCUA and a state regulatory agency regarding the content of disclosures, including any additional information provided to supplement NCUAs required disclosures. Further, there is no time frame under which an NCUA regional office must review additional disclosures, which could result in lengthy delays in the disclosure process.
The supplementary information accompanying the proposal references concerns raised by the Government Accountability Office in its August 2003 report. However, the supplementary information does not describe the current problems and deficiencies NCUA seeks to address with the disclosure provisions, including the proposed requirement that the agency preapprove additional information provided to members regarding private insurance.
Concerns about the Voting Process
Under the proposal, credit unions seeking to convert to private insurance would be required to undertake extraordinary, costly measures regarding the members vote on private insurance. Such measures include retaining an independent, third party to administer the member vote, leaving unclear the role of the credit unions board, supervisory committee or other internal credit union body, which would otherwise have overseen the vote. The supplementary information does not cite any abuses in the voting process to justify these requirements. While the use of the secret ballot may be beneficial to members, in the absence of such voting-process abuses CUNA does not support the changes to remove the election process from the oversight of the credit unions board and management. Because the need for the changes has not been documented and the requirements would be burdensome, we believe the adoption of such requirements is inconsistent with the agencys general approach to regulation and should not be pursued.
For the reasons discussed above, CUNA does not support the proposal and respectfully requests that the Board not approve it. If the Board concludes that such a rule is necessary, we urge the agency to redraft it based on the concerns raised during the comment period and reissue a new proposal for an additional comment period. Thank you for your consideration of our views.
CUNA Governmental Affairs Committee