WASHINGTON (1/27/14)--A proposal that would modify the operations of home-based federal credit unions is not justified on safety and soundness grounds, the Credit Union national Association said in a comment letter to the National Credit Union Administration. Equally troubling, CUNA said, is that this proposal reflects an increasing trend where the agency is developing regulations to address issues that should more appropriately, more effectively, and more efficiently be dealt with on an individual credit union-problem basis.
The CUNA letter follows the December release of a proposed rule that would prohibit federal credit unions from operating out of homes. All federal credit unions would have to maintain a business office not located in a home within two years of the final rule's effective date. Storage of credit union records at residential locations would also be prohibited.
Small home-based federal credit unions would also need to have either a dedicated phone number or email address for contact with the NCUA and members.
The NCUA proposed the changes to address concerns about member privacy, public access and the safety and working conditions of NCUA's examination staff. Operating credit unions out of private residences raises regulatory and supervisory concerns, including operational risks, privacy risks and potential conflicts of interest, the NCUA said.
"While CUNA does strongly support appropriate member and examiner access as well as safety and soundness for credit unions of all asset sizes, CUNA disagrees with the agency's assumption that problems among home-based credit unions are characteristic of all members of that group. We also disagree that problems among home-based credit unions are so threatening to the National Credit Union Share Insurance Fund that they can only be satisfactorily handled through the issuance of a new rule," CUNA Deputy General Counsel Mary Dunn wrote.
"Small, home based credit unions feel that the proposal, particularly the requirement that all federal credit unions maintain an office that is not within a personal residence beginning two years after the rule is implemented, is unjustified and punitive," Dunn added.
Issues with home-based credit unions would better be addressed on an individual basis, not through a broad rule, the CUNA letter said.
The CUNA letter suggested some changes in case the NCUA does move forward with a final rule. Suggested changes include:
Grandfathering existing home-based credit unions;
Allowing for exceptions to the rule's requirements to be granted under a fair and expeditious process;
Allowing member access to be through U.S. mail as well as the telephone or email; and
Allowing affected credit unions the option to correct legitimate problems identified by the examiner on a timely basis or move to retail space.
For the full CUNA comment letter, use the resource link.