Dennis Dollar
BIRMINGHAM, Ala.— A former NCUA chairman believes NCUA’s final associational common bond rule is an improvement over the original proposal, but also believes how the effects are felt will depend on how the agency interprets the rule when CUs ask to add an association.
That is a concern of Dennis Dollar, principal at Dollar Associates, who told CUToday.info that unless the agency begins to look for reasons to approve associational SEG applications, rather than turn them down, the movement may begin to see a migration of FCUs to state charters.
Thursday the NCUA board approved a final rule on associational common bonds that includes several changes based on credit union comments. Key changes from the proposed rule include increasing the number of associational groups automatically approved to 12 from five, removing the one-year requirement from the threshold test—which precedes the totality of the circumstances test—and reducing restrictions concerning corporate separation between the credit union and the association, essentially allowing the association to share an address with a credit union.
NCUA explained that the factors determining corporate separateness have been reduced to one—the books, records and accounts of the association and the credit union cannot be intermingled.
"Although I continue to believe that a new rule on associational SEGs is totally unnecessary since only a small handful of federal credit unions are improperly advertising how their associational affiliations work—and this small group could be better addressed through the examination process—the necessity of a rule doesn't seem to hinder a regulator when they really want one enacted,” said the former NCUA chairman.
Dollar termed the final rule “somewhat better” than the proposal, saying that NCUA deserves credit for the handful of adjustments made. He stressed, however, that it is still “unnecessary and inappropriate for NCUA to set itself up as the sole qualified arbiter to determine if an association chartered legally under state law is 'association enough' to be in a federal credit union's FOM.”
Dollar pointed out that state regulators are much more open to associational SEGs.
“Unless NCUA interprets this new reg with an eye toward trying to get to 'yes' on associational SEG applications rather than looking for reasons to say 'no,' the trend of federal to state conversions over FOM will only be exacerbated by this unnecessary rule,” he said.
Dollar said his firm is currently working nineteen federal to state charter conversions, all driven by the tight federal approach to FOM, with eight specifically taking action because of NCUA's “hostility” to associational SEGs.
“If administered and implemented with an eye toward encouraging associational SEGs rather than putting stumbling blocks in the way, this new rule could be positive,” concluded Dollar, noting his previous concerns over the necessity of the rule and NCUA being the sole arbiter. “The verdict of whether it is a good rule or a bad rule will be seen in its implementation—whether the rule is truly necessary or not. It is now the law, and NCUA has to make it work for federal credit unions or find themselves again with growing FOM complaints and more state charter conversions over FOM."