The COVID-19 pandemic’s ongoing economic effects on business and consumers is continuing to keep the attention of credit unions’ federal regulator, which is monitoring credit unions in certain sectors and working to ensure its own tools are sufficient to address potential systemic problems, according to remarks Tuesday by the agency’s board chairman.
National Credit Union Administration (NCUA) Board Chairman Todd Harper, speaking virtually before the Credit Union National Association (CUNA) Governmental Affairs Conference, said the agency is monitoring specific segments of the system, including credit unions closely connected to the oil and gas, travel and leisure, and agricultural sectors, “among others.” Additionally, he said the NCUA is focusing on credit unions with elevated risks, such as those institutions with large concentrations of commercial real estate loans relative to assets.
Harper underscored the importance to credit unions’ performance of effective interest-rate risk management, noting that rates will remain low for some time – likely below pre-pandemic levels – and will continue to put pressure on “already compressed” net interest margins. He also reiterated the steps taken in the past year to increase the capacity and powers of the Central Liquidity Facility (some taken under the CARES Act) which have increased the facility’s borrowing authority to $33 billion, with nearly 80% of all credit unions now having access to the liquidity the facility may provide. Congress has extended these powers through 2021, and Harper said he has asked that they be made permanent.
Harper reiterated his support for a dedicated program within the NCUA to supervise for compliance with consumer financial protection and fair lending laws. He noted, for examples that quality control reviews on randomly selected examination reports last year identified “several issues” that he said suggested some credit unions aren’t giving sufficient attention to consumer financial protection. In particular, Harper pointed to “notable shortfalls” in some credit unions’ compliance with the Fair Credit Reporting Act (FCRA); Electronic Fund Transfer Act (EFTA), and Truth in Lending Act (TILA), he said.
In other remarks, Harper said the agency this year will continue to focus on compliance with the forbearance provisions of the CARES Act and efforts to help consumers facing financial difficulties due to the pandemic; and he underscored the importance of economic equity and justice in ensuring the continued health and success of credit unions.