The National Association of Federal Credit Unions recently published a list it dubbed "The Dirty Dozen" - 12 regulations it feels are in need of amendment or outright elimination.
The list serves as a call to action of sorts for 2014, with particular pushes for securitized loans, increased mortgage servicing rights and an ongoing emphasis among its members to make their way into riskier investments, with the ultimate goal being the expanded authority of credit union investment.
The first stated goal is to "expand credit union investment authority," specifically with attention to investments in derivatives, securitization and mortgage servicing rights. The association has been and will remain an advocate of credit unions' expanded ability to engage in derivatives activities, pushing for greater authority in terms of loans and investing in the rights to service mortgages of all nature under the terms of Qualified Mortgage regulations.
Second, updating and modernizing the fixed assets rule is a priority. Specifically, credit union trade groups would like to see their primary regulatory body, the National Credit Unions of America, increase the current aggregate limit from 5 percent, re-define what constitutes "fixed assets" and improve the process for obtaining a waiver.
Simplifications for membership processes
Separately, the NAFCU would also like to see improvements made to the process by which credit unions must seek changes to their field of membership. In particular, the association stated that a renewed emphasis must be placed on enabling credit unions to strengthen an associational membership charter and streamlining conversion processes from one charter to another. Additionally, the limits on membership service within given metropolitan areas and contiguous jurisdictions, which currently cannot exceed populations of 1 million and 500,000, respectively, should be removed or drastically increased, according to the trade group. This would, theoretically, facilitate member credit unions' ability to add underserved areas and customers within their fields of membership.
Increasing the number of transfers allowed from savings accounts each month is another goal. The association has stated its concerns and disapproval for restrictions on so-called convenience transfers under Regulation D, noting that in many cases members have difficulties understanding and remembering rather arbitrary limits to the number and nature of transfers allowed to be made with a savings account.
"Members expect to have the ability to transfer their funds with ease to and from particular accounts, and the regulation's six-transfer limitation from savings accounts creates an undue burden for both members and credit unions," read part of the fourth statement. "This six-transfer limitation should be updated and increased to at least nine transfers per month, while still making a distinction between savings and transaction accounts."
Keeping up with the times
Credit unions offering business loans should be afforded greater flexibility, according to the NAFCU. Specific improvements in this area would include changes to the waiver process, increasing the minimum loan-to-value ratio from 80 to 85 percent and the removal of the five-year relationship requirement. Credit unions are also currently required to list a member's full account number on every periodic statement sent to the member under stipulations of Regulation E. Updating these requirements, so that credit unions can truncate numbers and protect the privacy of customers, would reduce identity theft and fraud risks.
Advertising requirements, most notably for loan products and share accounts, should also be modernized, according to the NAFCU's views. The group maintains that regulatory requirements for the advertisement of such credit union products have not kept pace with technological advances in the marketplace, and changes that reflect those advancements while maintaining the integrity and accuracy of such advertisements should be proceeded with. That also means updating regulations to clarify that the "official sign is not required to be displayed on (1) mobile applications, (2) social media, and (3) virtual tellers."
Improvements to the Central Liquidity Facility are also sought by the association, which hopes to reduce the amount of time it currently takes for a credit union to secure access to liquidity. The removal of the subscription requirement for membership and the permanent elimination of the borrowing cap are stated in conjunction with these improvements.
The final three improvements desired all pertain to enhancing clarity and flexibility for credit unions, mostly through simplifying or eliminating regulations from the U.S. Consumer Financial Protection Bureau. They include: Obtaining flexibility for federal credit unions to determine their choice of law; Updating, simplifying and making improvements to regulations governing check processing and funds availability; and eliminating redundant requirements that members must provide multiple copies of appraisals about request.
Each of the final three points emphasized in the Dirty Dozen highlight the continued pushback from credit unions against sweeping, indiscriminate regulation. The general sentiment among members is that many of the aforementioned mandates and limitations were imposed to monitor the activities of larger banks and lenders more directly at fault during the financial crisis, and that applying them uniformly to all lending institutions only serves as a detriment to credit union business.