COMMENT CALL: The National Credit Union Administration (NCUA) has announced the 10th round of proposed regulatory changes associated with NCUA’s Deregulation Project. The project is an ongoing review of NCUA’s regulations to ensure they are focused on credit unions’ safety, soundness, and resilience. Information on the earlier rounds can be found in the “open comment calls” and the “closed comment calls” Regulatory Advocacy pages of our website.
NCUA is requesting comments on one proposal that would clarify agency guidance and eliminate unduly burdensome and duplicative rules related to the merger of insured credit unions into banks. These changes are intended to let a credit union’s board of directors exercise its fiduciary duties and business judgement rather than imposing a rigid, agency-defined process.
The various changes in this proposal are summarized below.
Round 10
- Bank Conversions and Mergers – Merger of Insured Credit Unions into Banks. The NCUA proposal includes six changes to its rules, eliminating several provisions that are overly prescriptive and impose burdens on a credit union’s board of directors during merger deliberations. In its proposal, the NCUA wrote: “These changes are intended to restore the board’s role in exercising its fiduciary duties and business judgment, gravitating away from a rigid, agency-defined process. These proposed changes are intended to ensure members receive clear and effective disclosures to support informed decisions while providing credit union boards of directors with greater flexibility to exercise their business judgment.”
- Proposed change 1: Remove the definition of “clear and conspicuous” from §708a.301 of the NCUA rules on merger disclosures. The NCUA said: “This definition mandates specific formatting, such as bold type and a minimum 12-point font size. The [NCUA] believes this level of prescription is unnecessary and can hinder effective communication.”
Impact on credit unions: Removing this definition will allow credit unions the flexibility to design disclosures that are effective and clear for their members.
- Proposed change 2: Revise the newspaper publishing requirement in §708a.303(b)(1) of the NCUA rules. “The requirement to publish notice in a newspaper may no longer be one of the more effective methods for communicating with members in the digital age, while imposing unnecessary costs,” the NCUA wrote. “The proposal would require the notice to appear on the member home banking landing page, if the credit union has one.”
Impact on credit unions: This proposal would eliminate an outdated and possibly costly requirement. It would also make pre-board-vote notices more accessible to members who can find that information directly on the homepage of the credit union’s website.
- Proposed change 3: Revise the due diligence reporting requirements in §708a.304(d) of the NCUA rules, which oblige the board to describe how it located the merger partner and negotiated the merger agreement in its submission to the NCUA. The NCUA wrote that it, “believes that requiring a narrative on these specific internal processes is overly intrusive and micromanages the board’s deliberative functions.”
Impact on credit unions: This proposed change streamlines the reporting requirements, focusing on the substantive outcome of the board’s decision-making process.
- Proposed change 4: Remove highly prescriptive formatting requirements in §708a.305(e)(2) of the NCUA rules, which mandates that certain text in member disclosures must be placed in a box on the front of a single, otherwise blank piece of paper and placed at a specific point in the notice package. “Such prescriptive measures will not necessarily result in better member comprehension,” the NCUA wrote.
Impact on credit unions: Eliminating these specific formatting rules will reduce administrative burden.
- Proposed change 5: Remove plain language determining factors in §708a.305(f) of the NCUA rules. The NCUA described this as a “minor technical amendment.”
Impact on credit unions: This proposal would simplify compliance and credit unions would have more flexibility in their merger communications.
- Proposed change 6: Remove “Voting guidelines” from §708a.312 of the NCUA rules, which only provides non-binding guidance. The guidelines offer “advice on matters such as the applicability of state law, determining voter eligibility, and scheduling meetings,” the NCUA explained. “The provision itself acknowledges its advisory nature and, while such guidance can be helpful, the presence of non-binding guidance within a body of mandatory rules can create confusion for regulated entities, blurring the line between what is required and what is merely recommended.”
Impact on credit unions: Removing this section will streamline the regulatory text, making it clearer for credit unions to understand their legal duties.
Make your voice heard
The League may comment on some or all of these proposals, depending on the feedback we receive from Wisconsin’s credit unions. Please email Paul Guttormsson with your thoughts on this round of NCUA regulatory relief proposals by June 15, so that our comment letter (which is due June 22) can reflect your positions.
Compliance Roundtable – September 16 (In-Person)
Join members of The League’s compliance team as they lead a discussion on the latest changes in regulations and need to know information to keep your credit union in compliance. You can find more information or register on our website.