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Disagreeing with the priorities expressed by NCUA Chairman Todd Harper, credit union trade groups told the agency board Thursday that the NCUA has failed to justify an increased focus—and increased funding—for consumer protection examinations.
“The NCUA already has a robust consumer compliance program—you can just look to its consumer compliance manual which sets out both the exam expectations and requirements for credit unions to demonstrate this fact,” Virginia Credit Union League President/CEO Carrie Hunt, told the board during a hearing on the agency’s 2024 budget.
Others agreed.
“Nothing in the NCUA’s proposed budget adequately justifies the need for 13 additional consumer compliance specialists,” Curt Long, NAFCU’s chief economist told the board, during a hearing on the agency’s 2024 budget.
Budget Details
The NCUA staff has proposed a $382.1 million operating budget next year—an 11% increase over the agency’s 2023 spending plan. The 2024 budget proposal, prepared by agency staff, calls for an additional 28 positions, including 11 entirely new positions and 17 that have existed, but have remained unfunded. The plan also calls for 13 additional consumer compliance specialists and an increase in examination time for consumer financial protection reviews equivalent to 11 examiners.
No Shift in Priorities
Harper said that an increased focus on consumer protection would not shift agency priorities away from safety and soundness issues.
“Let me be clear on this point,” Harper said. “Safety and soundness and consumer financial protection do not compete with one another. It is not a zero-sum game.”
However, CUNA Chief Economist Mike Schenk said he believes the budget signals a shift. “Altering the agency’s risk-focused examination process and substantially increasing consumer examination-related expenditures is simply not warranted,” he said.”
Schenck also said that the agency should increase its use of offsite/hybrid examinations for smaller, less complex credit unions.
“As was evidenced during the pandemic, cost savings in the area of travel is certainly possible and does not generally result in any increase in risk to the credit union system,” he said.
Hunt also said that in focusing on the largest and the smallest credit unions, the agency should not neglect the vast majority of institutions.
“We believe the NCUA should ensure its focus does not stray from the ‘middle majority’ of credit unions, which often most acutely feel the pressure of inflation and economic conditions, having to compete and provide the same products and services as large financial institutions without the benefits of economies of scale,” she said.
Votes Unclear
The board is scheduled to vote on the 2024 budget at its December meeting and it is not clear, based on comments made by board members, that Harper will have the votes to support his consumer protection focus.
Talking about the overall budget increase, board Vice Chairman Kyle Hauptman said, “We’re going to put our hand in the Share Insurance Fund cookie jar and take $34 million cookies out of it.”
He said he believes agency staff has not adequately justified the budget increase.
“I know a lot of these things are important, but we have finite resources,” Hauptman said.
And board member Rodney Hood said he believes the agency should not hire additional employees to fill vacant positions at the agency.
However, a wild card may be Tanya Otsuka, who has been nominated to replace Hood on the NCUA board. Otsuka, who was nominated by President Biden, could give Harper the vote he needs to enact his priorities.
However, Otsuka has not yet been confirmed by the Senate, which is not back in session until the week of Nov. 27.
The NCUA board is scheduled to vote on its budget on Dec. 14, so it is not clear that she will be on the board by then.
In addition, NAFCU officials have said that they believe that if Otsuka was not on the board for Thursday’s hearing, she should recuse herself from voting on the spending plan.
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