ST. PETERSBURG, Fla.–Credit union leaders were given five things to be thinking about by one NCUA executive.
Speaking to the Defense CU Council’s annual meeting, Elizabeth A. Eurgubian, director of external affairs and communications with the agency, urged CUs to be thinking about:
One: The State of the Credit Union System
Overall, noted Eurgubian, the state of the CU system is strong, with more than 140 million total members (up four million from 2023), $2.3 trillion in total assets, and industry average net worth of 10.62% as of Q1.
But there are issues of concern, she said, especially in delinquencies in certain portfolios, especially credit cards.
“While the overall labor market indicates strength, significant part of is feeling some strain,” Eurgubian said.
Two: Credit Unions Must Improve Succession Planning
Without a good succession planning, a credit union is less sustainable, according toEurgubian.
It’s an especially critical issue for smaller credit unions, she added.
Eurgubian touched on the succession plan rule recently proposed by the NCUA board and currently out for comment.
The rule “will prepare credit unions for the future,” Eurgubian said.
She noted the proposal calls for a credit union to develop a succession plan that is consistent with its size and complexity.
“Smaller institutions may have a simple succession plan that addresses a few key leadership positions, while larger, more complex institutions would have more extensive plans for a variety of roles,” Eurgubian told the meeting.
She also explained that under the proposal all federally insured credit unions would have a succession plan that covers the board of directors and supervisory committee members, as well.
“So, what is the point of this proposed ruling?” Eurgubian asked. “The point is that we don't want to see credit unions merge or close up shop because they lack a succession plan. That comes with high costs, including the potential cost of the unanticipated merger of the credit union when key personnel depart. A failure impacts the share insurance fund and therefore all credit unions. Instead, we want to see credit unions thrive and serve their members and communities.”
Three: Protecting the Consumer
No matter how good a credit union’s intentions or how strong it believes its consumer protections are, “accidents happen and mistakes get made,” Eurgubian said. “That’s why the NCUA prioritizes consumer financial protection for credit unions and the consumers they serve.”
For that reason, she said NCUA’s 2024 supervisory priorities are overdraft protection programs, fair lending, automobile lending, Truth and Lending Act requirements, and the Flood Disaster Protection Act.
Credit unions should pay special attention to Reg B—the Equal Credit Opportunity Act- when it comes to fair lending compliance, especially any practices that could lead to the discrimination,” Eurgubian said.
“We've seen issues especially with regard to age and marital status,” she said. “So, these issues should be carefully reviewed in credit unions.”
Four: Watch Out for Cyberattacks
“Cyberattacks are a matter of when, not if,” said Eurgubian. “My advice is to take this very seriously.”
She urged CUs to update response plans, review third party contracts, train employees, document everything, patch vulnerabilities, conduct tabletop training exercises, and more.
She also pointed credit unions to the resources on the NCUA website at www.ncua.gov.
Five: Vendor Oversight
Eurgubian said vendor oversight authority remains a priority of NCUA and its chairman, Todd Harper, even as the credit union trade groups remain in strong opposition.
“This allows the agency to protect credit unions, the system and the share insurance fund,” said Eurgubian. “Third party providers are a critical part of the credit union ecosystem and are becoming more so daily. While we acknowledge the positive work being done by these partners, without visibility into third party vendors this industry has an enormous blind spot.”