A group of credit unions are fighting an NCUA rule that will prevent credit unions from enjoying all the benefits of a congressional program designed to help banks and credit unions serve more minorities.
A credit union CEO who spoke at a forum Tuesday for community development credit unions said the credit unions are willing to sue the NCUA over the rule.
Ninety credit unions have requested $ 3.1 billion from a $ 9 billion pool called the Emergency Capital Investment Program (ECIP). Congress established ECIP in December 2020 to encourage low and moderate income community financial institutions to increase their efforts to support small businesses and consumers in their communities.
The program is limited to Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs). While banks can borrow for 30 years, a new NCUA rule prevents credit unions from borrowing secondary capital for terms longer than 20 years.
The US Treasury Department, which administers the program, offers funds for terms of 15 or 30 years.
In a virtual “town hall,” sponsored by Inclusiv, a group representing more than 400 CDFI or MDI credit unions, CEOs blasted the NCUA for a rule they said violated Congress intent, had no statutory basis and effectively reduced the assistance that credit unions could provide. blacks, Hispanics and other minorities.
Martin Eakes, president / CEO of Self-Help Federal Credit Union, Durham, NC ($ 1.7 billion in assets, 89,525 members), said credit unions are ready to sue NCUA in justice to prevent him from implementing a rule that “takes away 50% of the value” of the Treasury program.
Eakes said he spoke with NCUA lawyers.
“They are good people,” Eakes said. “They just came out on a limb and their pride keeps them from crawling to the trunk of the tree.”
Eakes called the 20-year rule “one of the dumbest implementations of legal interpretation I’ve ever seen.”
“This is having an impact on the credit unions who need it the most. It impacts those who need it most. It eliminates 15 years of additional protection for the credit union insurance fund. There is no reason why this 20 year rule makes sense. There is no legal justification for this. I think we have to raise holy hell with the NCUA, ”Eakes said.
“It’s only pride that keeps them where they are,” he added.
Bill Bynum, president / CEO of Hope Federal Credit Union, Jackson, Mississippi ($ 411.4 million in assets, 35,709 members), said secondary capital has been a key factor providing the loan loss buffers that allowed the credit union to expand its loans quickly to help black communities in the South.
Bynum estimated that the NCUA rule means the credit union will be able to serve about half a million fewer people, of whom about two-thirds are minorities. And he said other credit unions would also be able to lend to fewer people.
“Spread across this country, we are talking about millions of people of color who would be excluded from benefiting from this program,” Bynum said.
Luis Pastor, president / CEO of Latino Community Credit Union, Durham, NC ($ 662.9 million in assets, 101,118 members) said the credit union has helped an immigrant community rejected by the federal and local governments. He had hoped to use the secondary capital to expand his immigrant loans, but these plans are scuttled by an NCUA rule.
“I don’t understand: these are our own regulators,” he said.
Pastor said he was “tired” of being treated as if CDFI credit unions weren’t for the “big table guys.” He said he felt NCUA officials thought the 30-year secondary treasury capital “is too good for you morons. We don’t want you to use these tools.
The FDIC allows banks to borrow for such programs for 30 years or forever.
In an October 1 letter to the NCUA, Inclusiv President Cathie Mahon wrote that credit unions also had no limits until December 2020, when the board included secondary capital in the wording of a provision dealing with subordinated debt issues.
“The agency swept aside secondary capital in this rule despite substantial differences in the nature and intent of these two instruments. This new rule was hastily reviewed and approved following many concerns raised in comments from industry leaders, including Inclusiv, ”Mahon wrote.