NCUA Proposes 11% Increase in Operating Budget

The NCUA on Thursday unveiled a $38 million operating budget that represents an 11% increase over the agency’s 2023 spending plan.

If approved by the agency board, the NCUA’s total budget would be set at $394.5 million in 2024—an $8.7 million decrease from the 2024 funding level the board approved as part of its two-year 2023–2024 budget. The total budget includes the agency’s operating budget, capital budget and the Share Insurance Fund’s administrative expenses.

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. Those increased reviews would include exams dealing with fair lending, particularly at institutions “with greater consumer impact or indications of potential violation.”

Consumer Protection Focus

In describing the need for the increased focus, the draft budget states that “The NCUA is seeing rising levels of interest rate and liquidity risk within the system. There has been an increase in compliance and fair lending concerns as well. There is also the potential for increased credit risk, especially among families with increasingly stressed household budgets and the post-pandemic uncertainties in the commercial real estate market. These risks can play out in rising delinquency rates for various loan types, including auto loans and credit cards.”

Increased consumer protection exams have sparked controversy in the credit union community. Republican NCUA board members Kyle Hauptman and Rodney Hood have resisted attempts by Chairman Todd Harper to increase consumer protection examinations.

Credit union trade groups have opposed increasing the agency’s budget to focus on those examinations.

Harper has argued that the NCUA is the only federal banking regulator that does not conduct separate consumer protection exams.

If Democrat Tanya Otsuka’s nomination to the board is approved, Democrats would control the majority on the board and Harper could have the votes to accomplish his goals.

The NCUA board is scheduled to consider the 2024 budget at its Dec. 14 meeting; it is unclear whether Otsuka could be confirmed by then.

Budget Details

In its draft budget, the NCUA additionally calls for:

–An Operating Fee rate increase of 19.59%, if the agency maintains its current fee exemption for credit unions with $1 million in assets. However, the agency has approved a proposed rule that would increase that exemption to $2 million; in that case, the Operating Fee would increase 19.61%.

–Establishment of a new Office of the Executive Secretary, which the agency said is a common function in many other federal agencies. In describing the new office, the draft budget states that it would “centralize responsibility for the NCUA’s policy review and decision-making processes, coordinate the clearance and submission of all policy documents to the Chairman and the NCUA Board, as appropriate, for review and approval, and facilitate discussions between the NCUA’s program offices to align appropriate policies, among other things.”

–Development of Bank Secrecy Act and consumer compliance specialist programs. The budget calls for 27 new regional examination staff for the new programs. The positions would be offset by a reduction of generalist examiners in the NCUA field offices.

–A new project that would use technology to streamline and automate the agency process of reviewing field of membership and new charter requests. The agency said that the project “will develop the requirements for and support the implementation of the tools and technology needed to provide a web-based portal for credit unions and organizing groups to submit their field of membership and new charter requests. This portal is expected to include forms for submission of information and data, the ability to upload supporting files, and a visible timeline so that submitters can see the progress on their application.”

The agency will hold a public budget briefing on Nov. 16 at its Alexandria, Va. central office, which will be webcast. The draft budget also will be published in the Federal Register and the NCUA will accept comment on it until Nov. 21.

NAFCU’s Criticism

NAFCU President/CEO Dan Berger sharply criticized the budget.

The “NCUA, once again, has proposed unreasonable increases for its 2024–2025 budgets,” he said. “With a proposed increase of 9.5 percent over 2023, the agency needs to rein in unnecessary spending. At a time of such economic uncertainty, the NCUA shouldn't be taking away money from credit unions and the 138 million members they serve. NAFCU will continue to call on the NCUA to find cost saving measures and hold the agency accountable.”