Upcoming Comment Letters to NCUA
The Missouri Credit Union Association (MCUA) continues to press the National Credit Union Administration (NCUA) to provide additional regulatory relief for credit unions, so that credit unions can devote more resources to serving their members. In that connection, here is a brief summary of upcoming comment letters:
In general, the four proposals are positive because they potentially offer additional regulatory flexibility under NCUA’s current regulations. However, our letters, particularly on NCUA’s payday-alternative loan (PAL) program and the definition of rural district for purposes of federal credit union field of membership, urge improvements and additional enhancements to provide credit unions meaningful relief. A summary of those letters is below and we will provide the links and further details when these comment letters are posted shortly.
- Payday-Alternative Loans (PALs) – Under this Advance Notice of Proposed Rulemaking, the agency seeks input as to whether credit unions should be able to charge more than the current $20 application fee for loans under PALs. NCUA also raised questions regarding other features of the PALs program. While NCUA does authorize a 28% annual percentage rate for PALs, the program is very restrictive and MCUA urges the agency to allow credit unions more latitude to determine the features and limits for these loans, within reason, and consistent with legal requirements. Our recommendations are based on the Credit Union National Association's (CUNA) policy statement on payday loan alternatives.
- Rural District Definition – This proposal would amend NCUA’s definition of a “rural district” by broadening the population criteria of the “rural district” designation from its current limit of 200,000 persons, to a limit of 200,000 persons or 3 percent of the population of the state in which the majority of the district’s persons are located, whichever is greater. All other criteria not related to the total population would remain intact. While we appreciate that NCUA is seeking comments on the definition of “rural district,” the current limit must be raised beyond the proposed level in order to be useful to credit unions that are operating in sparsely populated states.
- Low Income Credit Union Designation – We strongly support NCUA’s proposal to extend the time period credit unions have to accept a low-income (LICU) designation from 30 days to 90 days. As the agency has noted, some credit unions are currently finding that it takes longer than 30 days to fully consider the ramifications of the designation and to obtain any necessary approval from its board of directors. MCUA also urges NCUA to work with state regulators to ensure the LICU-designation process is positive for state chartered credit unions.
- Treasury Inflation Protected Securities - This proposal would allow federal credit unions to purchase Treasury Inflation Protected Securities (TIPS) as a permissible investment. We strongly support this proposal, and also urge NCUA to work with state regulators to facilitate the ability of well-managed state credit unions to invest in these securities where permissible under state law. In our view, credit unions should be able to use TIPS to manage their portfolios and balance sheets to mitigate inflationary risks consistent with appropriate risk and asset-liability management.