LAS VEGAS–Two former NCUA Board chairmen, one of whom remains on the board, talked about what it took to get the new CUSO rule passed, what’s ahead next week with a vote on “service facilities,” the challenge with board members when it comes to being digital, why members are less “satisfied” with their CU, and more.
Dennis Dollar, who served on the NCUA board from 1997 to 2004, where he was chairman during the last half of his term, held a discussion with Board Member Rodney Hood during the NACUSO Network conference in Las Vegas. Hood, who has served two terms on the board, succeeded Dollar on the board and also served as chairman.
Dollar is currently principal with Dollar Associates in Birmingham, Ala.
“He took my place as a spokesman for a regulatory philosophy that believes regulation should be effective, not excessive,” said Dollar, quoting a line Hood often uses.
Dollar noted that Hood had been pushing to get the new CUSO rule—which expands the lending powers of CUSOs—passed since 2018, and he was widely praised during the NACUSO meeting for his advocacy.
“I believe in the symbiotic powers of CUSOs,” said Hood. “I really wanted us to approve the CUSO rule because I’m a free market capitalist and I believe we should give consumers options. Whether I am Chairman or Board Member Hood, I believe good ideas should prevail. There were a lot of forces in our agency that did not want you to have that authority--people at senior staff level and a fellow board member.”
That “fellow board member” was a reference to Chairman Todd Harper, who voted against the CUSO rule.
Hood praised NCUA Vice Chairman Kyle Hauptman for his support of the CUSO rule and for helping to get it on the agenda.
Dollar told the meeting that when Harper first expressed opposition to the CUSO rule, he was then Board Member Harper. By the time it came to be voted on, he had been elevated by President Biden to chairman.
Not a ‘Coup’
“The chairman sets the agenda,” said Dollar. “He didn’t have to put it on the agenda. These two guys had to force it on the agenda, which two people can do.”
Hood, who joked he didn’t “force” it on the board agenda as part of what sounds like a “coup d’état,” said he and Hauptman instead worked with the NCUA board secretary to get the issue on the agenda.
“The chairman was very philosophical in his opposition and he said that he feared if CUSOs could make loans in the auto arena they may compete with credit unions and impact them,” said Hood. “Now, we know that CUSOs have over the course of the years expanded credit union lending, not restricted credit union lending. Look at where mortgage lending was 25 years ago. It’s a 2,000% increase. It’s the same thing in student lending.
CUSOs have enhanced the ability to make loans.”
Overall, said Hood, CUSOs have contributed about $800 billion in loans out of the total of about $1.5 trillion industry loan portfolio.
“Nowhere is this more important than in helping those small credit unions,” said Hood. “I am very enthusiastic, very bullish about the future.”
Service Facility Rule
In addition to the CUSO rule, Dollar noted Hood has led efforts to have a vote on NCUA’s proposed Service Facility Rule put on the agenda of the agency’s November meeting. If approved, credit unions will be able to use kiosks or ITMs to qualify as a “service facility” for the purpose of expanding fields of membership to serve underserved areas.
Dollar noted that NCUA’s rules and regs require any credit union looking to serve a new SEG, for instance, to have a “branch in reasonable proximity,” the definition of which has traditionally been 25 miles.
Dollar said the idea of branches as service facilities is obsolete.
“We know that these days most of us are carrying around our branch in our pockets,” said Dollar. “NCUA has been a little slow in coming around. They are still in a bricks and mortar stage.”
Hood said he views the expanded definition as a means of serving the underserved.
“If there is anything we’ve learned from the pandemic it is that many of our member-owners are using digital platforms to access their credit union, so why should we as an agency still require you to build bricks and mortar?” he asked. “So, this proposal lets you use kiosks (ITMs). Now, you can count that kiosk as a service facility rather than having to make that investment in bricks and mortar. I see this helping in tribal areas, in rural areas.”
And, he said, holding up his phone, “I would love for this to be a service facility.”
Hood said he expects the vote on the service facility proposal will be unanimous in favor.
Added Dollar, “It doesn’t matter if you have a physical facility or not if you can’t go in due to the pandemic.”
Additional Issues
Other issues addressed by Dollar and Hood during the discussion:
- Looking forward, Hood said he would like to see credit unions be able to invest directly in fintechs. “It’s a risky environment, but doing nothing is risky, as well. It’s not about risk avoidance, it’s about risk mitigation,” he said. “I want to broaden your powers to invest because many fintechs are not waiting for you to invest and become CUSOs. I would like to see this policy come to fruition during my term (which expires in August 2023).”
- Hood repeated his call for NCUA to create “regulatory sandboxes” in which it is able to explore “regulatory impediments by giving you safe harbor to test your product, to scale your product and use the opportunity to go broader.”
- Hood called on everyone to join him in getting CU volunteers on board with the new world of service delivery. “I have met a lot of board members and they have not embraced technology. We need to make sure we are helping our boards to embrace digital platforms. To thrive we have to have boards that really appreciate what digital can do.”
Credit Unions & Satisfaction
Finally, Dollar spoke to the fact credit unions have finished behind banks in the last two years when it comes to the American Customer Satisfaction Index score, on which CUToday.info has extensively reported.
“In my opinion, our members, like bank customers, are no longer judging the financial institution on whether they know my name when I walk in or know our kids,” said Dollar. “That was always our strength--that high touch. But it appears now the evaluation of customer satisfaction is driven more and more by whether my app works, whether my bill pay gets the bill paid on time.
“When you look at the fact BofA’s technology budget was $32 billion, which is larger than the assets of all but two CUs, this gap for our member satisfaction is going to continue to increase unless we can make those investments,” said Dollar.
Hood said he could not agree more.
“I think we’ve lost a lot of market share by not having the delivery systems many consumers are looking for today,” Hood said. “New generations want (numerous benefits). It’s why it behooves us to make investments to meet the needs of tomorrows’s member-owner. Many people are looking for a one-stop shop, especially small business owners.”
Added Dollar, “Technology doesn’t have to come at the expense of high touch. You can still have high touch. That’s our advantage against banks that are just high tech.”