GOP NCUA Board Members to Push Divisive Rules to a Vote

The two Republicans on the National Credit Union Administration board intend to join forces to bring final rules that Chairman Todd Harper opposes to a vote by the agency board, Washington Credit Union Daily has learned.

Republicans Rodney Hood and Kyle Hauptman intend to push three final rules onto the board agenda starting in October, according to a source familiar with the agency. The three rules were considered as proposed rules before Harper, a Democrat, was appointed as chairman to replace Hood. As a board member, he opposed the three rules. They have not been brought back to the board in final form.

Under NCUA rules, the chairman is responsible for the final agenda of the meeting. However, at the request of any board member, an item may be placed on the agenda of the next regularly scheduled meeting as long as the member making the request gives ten days’ notice to the agency.

In October, Hood and Hauptman intend to force a rule governing the activities of Credit Union Service Organizations onto the agenda. In November, the two intend to push a rule governing service facilities and in December, they plan to force a rule governing the purchase of mortgage servicing rights by credit unions onto the agenda.

When the board, under Hood, considered the proposed rules, Harper questioned why the board was considering them at that time. He did not go as far as accusing Hood of ramming through the proposed rules before the chairmanship changed.

Here are more details about the rules expected to go to the board:

Credit Union Service Organizations

In January, Hood, who was still chairman of the board, presented a proposed rule that would expand the list of permissible activities for CUSOs to include originating any type of loan that a federal credit union may originate.

Harper objected to the rule, saying that the NCUA has no authority to supervise CUSOs for compliance with consumer protection laws. He added that the agency also does not have power to supervise third-party vendors.

He added, “Why are we spending our time and valuable staff time on another proposal that is not ready for prime time?”

At the time, Hauptman said that it is “unfounded” that CUSOs would abuse the new authority.

Shared Services Facilities

In December, Hauptman and Hood voted to publish a proposed rule that would include any shared branch ATM or shared electronic facility in the definition of “service facility” for Multiple Common Bond federal credit unions that participate in a shared branching network. The proposal also asked commenters whether the definition of “shared facility” should be changed to include a credit union’s mobile banking application or website.

Hood said the rule changes would allow credit unions to serve more underserved areas.

Harper was blunt in his criticism, saying the changes, if adopted, would violate federal law.

“In my view, this proposed rule and request for comment do not conform with either the letter or the spirit of the Federal Credit Union Act,” he said, adding, “I do not find that a leased ATM, among other proposed structures, creates a sufficient field of membership nexus under the Federal Credit Union Act.” 

Mortgage Servicing Rights

In December, the NCUA board approved a proposed rule to allow federal credit unions to purchase mortgage servicing rights from other federally insured credit unions.

Hood said at the time that it would provide appropriate regulatory relief to credit unions.

Harper disagreed. “There are many risks associated with mortgage servicing — interest rate risk, price risk, compliance risk, operational risk, liquidity risk, concentration risk, reputational risk, default risk, and legal risk — just to name a few,” he said. “In fact, the text of this proposed rule details how mortgage-servicing rights have certain inherent attributes that can have an impact on a federal credit union’s financial condition.”

The agenda issues are expected to surface at the September 23 board meeting. The agenda for that meeting lists an item as “NCUA Board Agenda,” but gives no other details.

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