ICBA slams credit union regulator for pushing expansion during pandemic

The National Credit Union Administration on Thursday announced changes to how it calculates whether an institution is designated as a low-income credit union, a move that didn't sit well with some bank groups, which said the agency is using the chaos of the coronavirus pandemic to push its agenda forward with less scrutiny.

Members of the military will now be “considered in a similar manner as students attending colleges, universities, vocational or technical schools when the NCUA evaluates a federally insured credit union’s low-income designation,” the regulator said.

A credit union can be designated as low income if its membership meets certain criteria based on Census Bureau data and other requirements. A low-income designation comes with various benefits for credit unions, such as being exempt from the cap on member business lending and being eligible for funds from the Community Development Revolving Loan Fund.

There were 2,605 credit unions with low-income designations at the end of 2019, more than double the number of institutions with that designation 10 years prior (1,085 at the end of 2009). While the number of LICUs has more than doubled, the number of active credit unions also shrunk by roughly one-third during that same period.

The number of low-income credit unions rose dramatically in the early years of the last decade, partly because of encouragement from the NCUA as some of the industry’s efforts to garner legislative changes stalled. At one point in 2012 the agency approved more than 500 applications for LICU designations in just one month.

“At the NCUA, we’re always looking for ways to foster greater financial inclusion, accessibility, and opportunity for all Americans, which I consider to be the civil rights issue of our time,” Chairman Rodney E. Hood said in a press release. “This is a great step in being more inclusive when it comes to the members of the military.”

The NCUA previously only geocoded the earnings of members with physical street addresses, but this excluded members of the military who used Army/Air Post Office and Fleet Post Office addresses. Active-duty service members frequently move throughout the U.S. and around the world and often use those post office addresses as their mailing addresses.

Credit union groups praised the regulator’s move but banks pounced on it, with the Independent Community Bankers of America suggesting the NCUA used the chaos of a global pandemic to usher in additional changes while the public’s attention is diverted elsewhere.

"The NCUA's changes — made without a formal rule subject to public review and comment — is another example of this captive regulator expanding the powers of credit unions well beyond the limits established by Congress to justify their tax exemption,” ICBA President and CEO Rebeca Romero Rainey said in a press release.

The trade group specifically singled out PenFed for criticism and said some moves by PenFed and other large credit unions “contrasts sharply with the industry’s founding purpose — serving people of modest means with a common bond.”

This isn’t the first time bank groups have suggested credit unions are milking the pandemic for all its worth. After the announcement that a bipartisan group of legislators planned to introduce a bill temporarily lifting the member business lending cap on any commercial loans credit unions make tied to helping small businesses recover from the coronavirus, the American Bankers Association called the move “an attempt by the credit union industry to quietly ease longstanding commercial lending limits using the current crisis as a cover.”

The ICBA’s pushback included calls for Congress to examine the NCUA’s decision and the credit union tax exemption. Last fall the group launched a Wake Up campaign aimed at persuading lawmakers to be more skeptical of credit union business practices, particularly at larger institutions.

This story was updated at 10:30 P.M. on May 7, 2020.