e-Weekly
November 25, 2009
NCUA Board approves 2010 budget to strengthen supervision
Recently the National Credit Union Administration (NCUA) Board unanimously approved a 2010 budget designed to strengthen supervision as troubled credit unions are projected to continue growing both in number and size. The 2010 budget of $200 million represents an increase of $23 million over the 2009 budget and $11 million over last year’s projections for 2010. The vast majority of new dollars will fund programs supporting credit unions’ safety and soundness. The budget authorizes 74 new positions – 57 will contribute directly to examining federally insured credit unions on an annual cycle rather than every 18 months.
During the National Credit Union Share Insurance Fund report, the NCUA Board heard that CAMEL codes 3, 4 and 5 increased to 1,977 credit unions representing over 18% of all insured shares – the most shares at risk in over a decade.
The 2010 budget also includes several new initiatives that Chairman Matz said “will help take this agency to the next level.” One of those initiatives is the new Office of Consumer Protection (OCP) is intended to make certain the NCUA: Thoroughly applies all relevant consumer protections; Reviews every NCUA regulation for consumer friendliness; Promotes helpful tools for consumers such as financial education; and encourages credit unions to reach out to serve all eligible consumers.
OCP plans to organize these functions into two divisions:
- The Division of Consumer Protection will focus on:
- Consumer compliance policies and rulemaking;
- Fair lending exams;
- Consumer calls and correspondence;
- Inter-agency liaisons for consumer issues; and
- Financial education.
- The Division of Consumer Access will be able to more efficiently process:
- Field of membership expansions;
- Conversions;
- New charters;
- Bylaw amendments; and
- Low-income designations.
On field of membership applications, Chairman Matz envisions, “The Division of Consumer Access would consolidate multiple levels of review. In the process, we would draw on the experience of staff in the field who are familiar with the local credit unions and the communities they are trying to serve.”
Another new initiative is the Office of the Chief Economist which will be designed to “take the macro view, watch for leading indicators, identify economic trends, and alert examiners to potential problems in credit unions before they appear on call reports as red flags.”
Credit union carved out of Stability Fund Act
In a vote of 52-17, the House Financial Services Committee adopted an amendment to H.R. 3996, the Financial Stability Improvement Act of 2009, which would, in effect, exclude all credit unions from having to contribute to a stabilization resolution fund for systemically risky institutions.
H.R. 3996 would create a stabilization resolution fund, located at the Federal Deposit Insurance Corporation (FDIC), to cover the cost of resolving failing financial companies that are systemically important to the financial system. The National Credit Union Share Insurance Fund (NCUSIF) currently has similar authority with respect to insured credit unions.
The stability bill was set to direct the FDIC to assess financial companies, including credit unions, with over $10 billion in total assets to provide the initial funding for the new fund, and to replenish the fund in the future. Offered by Representative Brad Sherman (D-Calif.), the amendment adopted ups that threshold to $50 billion, effectively exempting all credit unions.
Credit Union National Association (CUNA) President/CEO Dan Mica praised the committee vote and said, "Credit unions and CUNA appreciate the House Financial Services Committee taking action to essentially eliminate credit unions from paying into a fund that would finance a ‘systemic risk' regulatory agency.
Filene study finds bank fees dwarf those of credit unions
Bank customers pay substantially more in overdraft fees and other account fees than credit union members, with low-balance bank customers taking the brunt of that burden, a recently released Filene Research Institute study has found.
The study, which was authored by University of California, Davis Assistant Professor of Economics Victor Stango and Dartmouth College Associate Professor of Economics Jonathan Zinman, draws information on transaction account fees from the account data of a panel of consumers.
While some of the cost differences "can be attributed to behavior," the study concluded that "much of the difference simply stems from banks' higher prices."
"The largest driver of the bank/credit union fee difference is the overdraft fee, which on average is roughly one-third lower at credit unions than at banks. Credit unions also charge significantly lower ATM foreign fees," the study added.
Overall, the study found that while credit union members paid $35 in overdraft fees over the course of a year, bank customers on average paid $132 in overdraft fees over the same time period, almost four times the amount paid by credit union members. The report also found that while credit union members pay an annual average of $73 in total transaction fees, including ATM foreign fees, ATM surcharges, and other fees, bank-customer households pay $183 in fees during the same time period.
Low-balance accountholders, which the study defines as accounts with a balance under $1,500, paid $165 per year in overdraft fees if they were customers of a bank, whereas low-balance credit union members paid $42 in those same fees. General account fees were also higher for low-balance bank customers, with a reported $218 in fees being paid on a yearly basis. Credit union members paid $80, the study found. Sixty-nine percent of bank customers and 75% of credit union members surveyed fell below the "low-balance" threshold.
The majority of accountholders surveyed had an average account balance of $500 or less.
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