NCUA still eyeing alternative capital, payday-alternative loan proposals, McWatters tells group

Alternative capital for credit unions, addressed in a 2017 advance notice of proposed rulemaking (ANPR), is still on the agency’s regulatory radar, National Credit Union Administration (NCUA) Board Chairman J. Mark McWatters said Thursday in remarks at a conference in Atlanta, Ga.

The chief federal regulator of credit unions was speaking Thursday before the 300 attendees of the African-American Credit Union Coalition (AACUC) Annual Meeting. McWatters noted the importance of minority credit unions and discussed what the agency is doing and considering to increase its support of the institutions.

NCUA Chairman J. Mark McWatters

“The NCUA has a statutory obligation to preserve minority depository institutions and encourage the creation of new ones, and it is one that we take seriously,” he said. “The agency is exploring additional ways it can provide minority credit unions with support through training, grants and other initiatives. Recent regulatory changes like those to our field-of-membership rules will also provide these credit unions with new and better opportunities for growth.”

He also said the agency is looking at other ways to modernize the regulatory structure to give credit unions the flexibility they need to compete while maintaining safety and soundness.

NCUA’s 2017 ANPR on alternative capital and the recent proposal to provide additional payday alternative loan options, he said, are two examples of the regulatory changes being considered that could assist minority credit unions in meeting the needs of their communities.

NCUA says 564 credit unions, or 10% of all federally insured credit unions, were classified as minority depository institutions as of the end of the first quarter of 2018. Collectively, these credit unions had more than 4.3 million members and $42 billion in assets.

“Unfortunately, minority credit unions are too often the only federally insured financial institution available in rural and urban communities that have been historically unserved by traditional financial institutions,” McWatters said. “Their presence in these communities provides an alternative to actors that engage in unfair practices at the expense of consumers. It’s that commitment to serve that makes minority credit unions the embodiment of the credit union philosophy of people helping people.”

McWatters noted that minority credit unions face a number of challenges such as competitive pressure from alternative financial service providers, the lack of adequate resources, higher delinquency rates, and the inability to take advantage of economies of scale. He added that the NCUA has resources available through its Office of Credit Union Resources and Expansion to help minority credit unions grow and provide new products and services.

McWatters also stressed the continued need for women and minorities to have greater representation on credit union boards.

“The demographics of the country and credit union members are changing. For credit unions to remain in touch with their members and true to their mission of service, greater representation of women and minorities is essential,” McWatters said. “I encourage the credit union community to address this issue aggressively and to look for ways to invite more women and minorities into the boardroom and positions of leadership. It is the right thing to do, and it is long overdue.”

McWatters: Minority Credit Unions Play a Critical Role in Reaching the Underserved