WASHINGTON—Calling for relief from what it describes as “unnecessary regulatory hoops,” the Endangered Small Credit Union Defense (ESCUD) has sent a letter to the NCUA urging the agency to exempt small credit unions (under $500 million) from complex bond insurance renewal requirements.
In its letter, ESCUD—a nonprofit advocacy group dedicated solely to credit unions under $500 million in assets—said the 2019 rule changes have turned a once-simple annual process into a burdensome exercise for volunteer boards and examiners alike, with little measurable benefit to safety or soundness. The group’s proposal aligns with a similar request recently filed by America’s Credit Unions but emphasizes the disproportionate impact of the regulation on small institutions.
In its letter, signed by Doug Wadsworth, founder and president of ECUD, the group notes that credit union CEOs have been responsible to ensure they have the proper bond insurance, “and this is just part of their job. Every time examiners come, they review this coverage to ensure it is compliant with the regulation. Volunteer boards of directors have never had to be very involved. Renewal was fast and easy, and worked perfectly 99.9999% of the time.
“There are an infinite number of ways that fraudsters can scam the system, and it isn’t feasible to introduce a regulation for each remote possibility, but apparently some credit union somewhere failed to get the adequate level of insurance or doctored the documents, so that their credit union wasn’t adequately insured, and a loss resulted. Despite the old method working perfectly for 50 years, a bunch of new regulatory hoops were added, which we now have to jump through every year, requiring board involvement,” continudf Wadsworth.
“There doesn’t seem to be any benefit to the credit union, or the insurance fund - just more work for the credit union, more work for the volunteer directors, more work for the examiner, longer examinations and more DORs in areas that don’t impact safety or soundness,” concluded Wadsworth.