WASHINGTON—In a comment letter to NCUA on the operating fee schedule methodology and overhead transfer rate, CUNA suggests the agency is attributing too many activities to “insurance-related costs” and suggests an alternate model for the OTR.
In its letter, signed by Senior Director of Advocacy and Counsel Andrew Price, CUNA argues that “safety and soundness” does not equal “insurance related activities,” even though NCUA’s practices suggest that it does. “NCUA even acknowledges this, in part, noting that ‘some consumer protection regulations may also be directed at safety and soundness,’” Price wrote. “Yet safety and soundness is only carved out of overhead transfers as they relate to consumer protection regulations.”
The CUNA letter goes on to suggest: “The problem with this definition is that it shifts charges to the NCUSIF for all safety and soundness functions (other than those related to consumer protection), where some of the safety and soundness function should be clearly allocated to the proper Title I function and assessed only to federally chartered credit unions. Safety and soundness should not be a catch-all by which NCUA can allocate all of its activities for purposes of having the NCUSIF fund the agency.”
Price stated that a “startling indication that indeed the methodology is not properly capturing ‘insurance related activities’ can be discerned from NCUA data,” and he goes on to show growth in the OTR from 52% (of budget funded by the NCUSIF transfer) in 2008 to 73% in 2016, even though the number of CAMEL 4 and 5 credit unions has decreased markedly over that time.
“While there are other factors that might have bearing on those activities related to insurance activities, such as the conversion of a federal charter to state-chartered institutions, with the improving economy and the strengthening of credit union balance sheets, the dramatic increase in the transfer rate is still staggering and highlights the potential flaw in the fairness of the current methodology,” Price wrote.
The letter goes on to urge NCUA to seek greater efficiencies by working with state regulators, notes that the actual amounts of the total Operating Fee for federal credit unions actually decreased over the past few years, although the overall total budget for the NCUA has increased and the OTR has dramatically increased, and suggests an alternate OTR model.
The complete letter can be found in CUToday.info’s The gov here.