(Washington, D.C.) – Citizens Against Government Waste (CAGW) today criticized the National Credit Union Administration (NCUA) for taking a hyper-analytical regulatory approach to prevent credit unions from changing their charters to become savings banks.  On July 11, the NCUA denied a conversion request from Texas-based Community Credit Union (CCU), the largest credit union to attempt a conversion, because some documents were folded the wrong way.   

“It is the dog days of summer and it appears federal bureaucrats have nothing better to do than harass and put up bogus barriers to a credit union that wants to change its charter and become a savings bank,” CAGW President Tom Schatz said.   “Community Credit Union submitted the proper documentation in the appropriate format.  It seems NCUA has decided that how a credit union folds a piece of paper is more important than whether the credit union is capable of becoming a bank.”

Credit unions usually decide to convert to a bank because it allows them to expand the services they can provide to their customers such as increasing their lending to businesses.  The credit union must ask its membership if they want to convert and provide the information and ballots through the mail.  NCUA regulations require that members receive the information in a particular format called “Boxed Disclosures.”  The boxed format, when printed on paper, helps credit union members find the information more easily on the types of problems that can occur with a conversion. 

The regulatory agency claimed the informational piece containing the boxed disclosure submitted by CCU wasn’t clearly visible in the mailing.  Unless NCUA backs down, the only way CCU can fix the problem is to send out a new mailing to its members, fold the paper the way NCUA wants them to, and explain to its members why their first vote was invalidated and they are getting a second mailing.  If CCU goes through with the second mailing, it could cost the credit union an additional $500,000 in printing, postage and processing.  

“This is government overreach and an excessive, analytic reading of the regulation,” Schatz continued.  “What is even more offensive is the apparent basis for the NCUA’s obstinacy.” 

Since 2002, the NCUA has lost more than 700 credit unions as its members.  NCUA has to return reserves that are held by the National Credit Union Share Insurance Fund (NCUSIF), an insurance fund it administers, to CCU, which amounts to about $10 million.  

“So far Community Credit has received the backing of its members, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Texas Credit Union Department.  Even members of Congress have weighed in and decried NCUA’s ridiculous and flimsy reason to deny the conversion.  It seems the only one without its head on straight is the NCUA.  It is time for NCUA to use common sense, stop wasting time and tax dollars, and approve the conversion,” Schatz concluded.

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.