Todd Harper’s 90 Day Audition as NCUA Chairman-Part III: The Commander’s Call

In his February DCUC 2021 speech, Todd Harper stated: “As the COVID-19 pandemic rages on, we must smartly, pragmatically, and expeditiously address the economic fallout within the credit union system. To that end, when I first became Chairman, I issued my Commander’s Call to the agency.”

What will this Call entail? What do events from his previous NCUA tenure as senior policy advisor and PACA director for Chairman Matz suggest about his views on America’s credit union system?

Closing Home-Based Credit Unions by Rule

The Debbie Matz era was marked by a lack of transparency, catastrophic corporate liquidations and an avalanche of new regulations. One of the policies was a regulatory vendetta against small credit unions. The first effort in December 2013, was described on creditunions.com:

“At its December 2013 meeting, the NCUA board voted 2-to-1 for a proposed new rule (12 CFR part 701.40) that would do away with credit unions’ ability to operate from homes. The 30-day comment period is over. If finalized as presented, the rule would immediately require home-based credit unions to provide a public exam location. Within two years, the proposal dictates that all federal credit unions must “obtain and maintain a business office not located on the premises of a private residence.”

When a FOIA request was filed for the names of the 81 federal credit unions which NCUA cited as the basis for the rule, the response was: “Your request is denied in full.”

NCUA’s Office for Small Credit Union Initiatives (OSCUI) supported the rule which explicitly contradicted its own mission: this office “supports the success of small credit unions … (and) recognizes the unique role small, low-income designated and new credit unions play in the lives of their members and communities. We are committed to helping these credit unions not only survive but thrive.”

The NCUA’s New Philosophy and Misinformation

The regulation’s goal as stated: “the proposed rule intends to ensure all FCUs operate in a manner consistent with modern-day expectations for insured financial institutions.” The term “modern-day” was not otherwise defined.

Then Chairman Matz told the Credit Union Times in an April 7, 2014, article: “Times have changed, and financial institutions have changed as well and if you are stuck in the past, that means you are not growing, and you are not serving your members well and they would probably receive better services from a different credit union.”

The rule’s premise was based on inaccurate and misleading facts: “NCUA asserts home-based credit unions are “stuck in the past,” but the fact these credit unions have an average charter length of 55 years and have survived the Great Depression, World War II, the Vietnam War, and the Great Recession tells a more meaningful story.”

Bestowing the Regulator’s Imprimatur

One CEO strongly opposed this vague, regulator-imposed “modern-day” criteria noted that one effect would be to kill all new charter activity:

It is not about the fact that I believe 500 [credit unions] will pop up tomorrow — it is about the fact that I support their right to start, exist, and maintain a credit union charter. It is about the fact that I do not believe the NCUA gets to make the call on what is relevant — it is here to serve American consumers in their right to form and maintain a financial cooperative. When a regulatory body decides it makes the call on whether a charter is relevant, then the spirit of renewal is dead and the spirit of our pioneers is dead. Also dead is the hope that, should we need more credit unions in the future, there will a fair process or will to foster them.” 

In the seven years after this rule was proposed, NCUA has approved been only 15 new charters. In the seven years prior to this, there were 57. In 2020 only one new charter was granted.

Where is Chairman Harper on This Issue Today?

In his DCUC speech last month, Harper stated: “My whole heart is in the mission of the NCUA and its vital work.”

It is hard to know a person’s heart. Chair Matz, whom Harper advised, defended the rule for months after passage. The credit union system objected strongly, not just the several hundred smaller credit unions that would be shut down. The effort eventually died without explanation from the agency.

What was senior policy advisor Harper’s role in this rulemaking? What is his position today? Does he support the agency policy to eliminate small credit unions? Is this “modern-day” criteria a standard he believes the regulator should determine? What is his view on new charters?

It is vital that credit unions know what Harper understands as “the mission of NCUA and its vital work.”

NCUA’s efforts to eliminate smaller credit unions did not end with this rule. Shortly thereafter, OSCUI undertook another initiative described tomorrow in NCUA, Oxymorons, Truth.

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