ARLINGTON, Va.–The National Association of State Credit Union Supervisors has created a brief video that explains the purpose and mechanics of the overhead transfer rate (OTR), including its impact on state-chartered credit unions.
The OTR is the ratio that NCUA applies in transferring money from the National Credit Union Insurance Fund to the agency’s operating fund to cover “insurance-related expenses.” In 2015, about 72% of the agency’s operating expenses are covered by the OTR.
According to NASCUS, in addition to describing how the OTR works, the short video also specifically notes that:
- While the OTR has been expanding over the last three years, federal credit union operating fees have declined over that period by $14.3 million.
- That has, in turn, reduced FCU out-of-pocket expenses.
- Giving FCUs a singular advantage, and negatively affecting the competitive position of state-chartered credit unions relative to FCUs.
“We settled on this approach to afford a simple and concise way to explain the OTR,” said NASCUS President and CEO Lucy Ito. “The OTR is a crucial issue to our members, as it has important implications to the balance of the dual-chartering system.”
In June, NASCUS released a legal analysis conducted by a Washington, D.C., law firm, which concluded that the OTR is a “major rule” and is subject to notice and comment requirements under federal law.
“As the analysis points out, by shifting a portion of federal credit unions’ share of NCUA expenses to the NCUSIF, the OTR reduces out-of-pocket expenses incurred by federal credit unions,” Ito said. “Our fundamental point is that the resulting reduction in federal credit union operating fees provides a singular advantage to those credit unions, and adversely affects the competitive position of state charters relative to federal charters.”
The video can be viewed here.