The Credit Union Association of New York recently urged the National Credit Union Administration to allow the continued operation of home-based credit unions after the regulator proposed rules to ban the institutions.
NCUA’s proposal bans the operation of in-home credit unions and would require existing home-based institutions to acquire office space within two years. CUANY said the proposal “implicitly argues that home-based credit unions are vestiges of a less sophisticated era of credit union development.”
“This fact alone doesn’t justify imposing a regulatory requirement that will force some of these credit unions to liquidate, rather than find office space,” CUANY said in its letter. “Many credit unions started as home-based credit unions, and today’s institutions should be given the same flexibility to evolve organically.”
The proposal, which would not apply to federally insured, state-chartered credit unions, is designed to address concerns related to examiner safety. CUANY said that while the concerns should not be dismissed, they can be examined without pushing all credit unions outside of the home.
“NCUA should codify its existing practice, giving examiners the right to require that audits take place outside a person’s home,” CUANY said. “In addition, safety and soundness concerns can be addressed for home-based credit unions in the same manner that they are addressed for office-based institutions. When a credit union is not complying with the necessary regulations, it should be held accountable for its failure. Conversely, NCUA should not be allowed to categorically conclude that all credit unions operated out of a home are incapable of operating with safety and soundness.”
NCUA voted 2-1 in favor of the measure in December, with dissent from board member Michael Fryzel.
Fryzel questioned the exemption of federally insured credit unions, saying the proposal was neither desirable nor within the NCUA’s scope of authority.