After listening to yesterday’s NCUA board meeting, I recall this observation from a credit union leader who was a keen observer and co-op philosopher:
“The relationship between credit unions and the regulatory agency is one founded on mutual self-respect and the realization that both sides share equally in the responsibility for the survival and future development of credit unions.
“It seemed as though we would never escape the attitude that the regulator knows best. But a dramatic change has taken place in the last few years. We now have a federal regulatory agency which openly concedes that credit union people know more about running credit unions than the agency does.
“The nature of the federal bureaucracy, being what it is, there will be a great amount of inertia to cause it to revert to a less creative and less cooperative approach to regulating credit unions. I would not like to see this happen.”
Source: Frank Wielga, CEO Pennsylvania State Employees Credit Union, NCUA 1984 Annual Report, page 14.
An Alternative to NCUA
A state charter option is an alternative to the ever increasing federal burden.
This is the description and public leadership of the Texas Credit Union Commission (CUD). It supervises 160 state charters and $57 billion of assets:
The Credit Union Department (CUD) is the state agency that regulates and supervises credit unions chartered by the State of Texas. The Department is professionally accredited by the National Association of State Credit Union Supervisors (NASCUS) certifying that CUD maintains the highest standards and practices in state credit union supervision.
Our Mission is to safeguard the public interest, protect the interests of credit union members and promote public confidence in credit unions.
Credit Union Commission
The Commission is the policy making body for CUD. The Commission is a board of private citizens appointed by and responsible to the Governor of Texas. Members: Jim Minge, Chair Elizabeth L. “Liz” Bayless David Bleazard Karyn C. Brownlee Beckie Stockstill Cobb David F. Shurtz Kay Rankin-Swan.
Following is the Commission’s November 2023 guidance on consumer compliance. It is a very different tone and approach from the debate of this topic at NCUA’s budget hearing yesterday.
Cultivating a Culture of Compliance and Service
As consumer-focused financial institutions, compliance with consumer protection laws sets minimum standards for member service. Developing a culture of compliance means paying attention to compliance and member service at all levels, from the front-line teller to the C-suites of your credit union.
At the Credit Union Department, one of our functions is to process member complaints related to their credit unions. Many of these complaints could have been avoided with a culture of compliance and member service.
Last year we processed 515 complaints, and of those, 156 (over 25%), involved disputes related to fraud or billing errors, by far our largest segment. A robust, member focused, dispute resolution process as required by Regulation E (debit cards, ACH) and Z (credit cards) would have prevented many of these complaints.
Another area of common member complaints surrounds vehicle loans. Many disputes involve the member being pressured by the car dealer to purchase a more expensive vehicle or add-ons such as warranties and insurance without adequate time to consider the costs and need for the products.
Credit Unions should be aware of implications of consumer protection holder rules, where loans originated by a dealer, subsequently assigned to credit unions, are subject to being offset by claims of the borrower against the dealer. See Holder in Due Course Rule | Federal Trade Commission (ftc.gov).
Understanding the requirements of consumer protection rules related to serving credit union members goes a long way, not only in preventing complaints, but limiting losses.