September 24, 2025 • 40 mins
Whew, credit unions dodged the threat of loss of their tax exemption - but don’t think all is smooth sailing for credit unions in today’s turbulent Washington DC. Lots is happening that may impact credit unions, large and small.
On the show is repeat guest Elizabeth Eurgubian, a lobbyist - with the Defence Credit Union Council among her clients - who also has served as NCUA Director of the Office of External Affairs and Communications and Policy Advisor to Chairman Harper. Before that she was deputy chief advocacy officer at CUNA and before that she was a vice president and a lobbyist for ICBA.
Her specialty is regulatory matters and that means NCUA, but also CFPB and other agencies.
In this episode she talks about what’s up with NCUA’s one person board, the shrinking of CFPB, the GENIUS Act and the opportunity presented by stablecoins, and NCUA’s Central Liquidity Enhancements Act and why this matters to smaller credit unions in particular, and also NCUA’s recurring paperwork review and how it’s an opportunity for credit unions to seek changes at the agency.
See: there’s a lot happening inside the Beltway.
Listen up
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_02 (00:00):
Welcome to the CU2.0 podcast.
SPEAKER_00 (00:05):
Hi, and welcome to the CU2.0 podcast with big new
ideas about credit unions andconversations about innovative
technology with credit union andfintech leaders.
Woo.
Woo.
SPEAKER_02 (00:36):
Credit unions dodged the threat of loss of their tax
exemption earlier this year, butdon't think all is smooth
sailing for credit unions intoday's turbulent Washington,
D.C.
Lots is happening that mayimpact credit unions large and
small.
On the show is repeat guestElizabeth Ergubian, a lobbyist
with the Defense Credit UnionCouncil among her clients, who
(00:59):
also has served as NCUA Directorof the Office of External
Affairs and Communications and apolicy advisor to Chairman
Harper.
Thank you so much for joiningus.
(01:36):
and NCUA's Central LiquidityEnhancement Act and why this
matters to small credit unionsin particular.
And also there's NCUA'srecurring paperwork review and
how it's an opportunity forcredit unions to seek changes at
the agency.
And yes, she says, NCUAdefinitely reads email sent in
by credit unions.
(01:58):
See, there is a lot happeninginside the Beltway.
Listen up.
Now, with DCUC, your focus isregulatory.
SPEAKER_01 (02:08):
Yes.
SPEAKER_02 (02:10):
As opposed to legislative.
SPEAKER_01 (02:12):
They're a client of Atlas Advocacy, myself, and we
do regulatory advocacy.
We support them in that regard.
Yep.
SPEAKER_02 (02:21):
So that means primarily this would be
interfaced with NCUA, notexclusively, but primarily.
SPEAKER_01 (02:28):
You know, I mean, we help guide them on messaging and
whatnot with The agencies, yeah,NCUA, CFPB, Treasury, SBA,
whatever agency that they'redealing with on certain issues.
And we also look at theregulations, look at the
changes, look at the notices andissue spot for them on things
(02:50):
that would be really importantfor them to pay attention to.
Now,
SPEAKER_02 (02:55):
when last we talked on the table was taxation for
credit unions, that's fallen offthe table, at least for the time
being.
I'm sure it'll come back.
We do have a whole bunch ofissues to discuss.
And one that you put down onyour list is, and it's probably
top of mind for many people, isNCUA board structure.
(03:18):
What the heck's going on there?
So we're down to one member ofthe three-person board.
SPEAKER_01 (03:25):
Right.
SPEAKER_02 (03:25):
What's happening with the other two at this
point?
SPEAKER_01 (03:28):
So the other two have appealed their dismissal,
and that's making its waythrough the court
decision-making process.
And we're seeing that with otherdismissals by the administration
like the FTC member that theTrump administration dismissed.
And the reason these are beinglitigated is because he
dismissed these individuals notfor cause.
(03:53):
And the argument is that that'snot allowed.
He has to be able to have causein order to dismiss them because
based on their role in statuteas an independent agency, they
they can only be removed by thesitting administration if
there's cause.
SPEAKER_02 (04:10):
And specifically with the NCUA, those individuals
were Senate-confirmed?
SPEAKER_01 (04:16):
Yes, Senate-confirmed.
So right now they're waiting.
They're sort of in the processof waiting and letting this run
through the litigation.
And it'll probably go to theSupreme Court.
It'll be decided.
And at that point, we'll knowfor certain whether or not this
administration is dismissal ofthose two board members will be
considered, you know, consistentwith what the statute, the
(04:39):
federal credit union actmandates now.
So that means we have chairmanHoutman who's acting by himself
at the moment and his termsactually up.
I mean, his term was up inAugust, but it's not unusual for
board members and, and chairmanto stay chairman chairwomen to
stay past their term.
So he's there until, you know,it's eventually until the
(05:02):
president appoints somebodyelse.
And that person Senateconfirmed, and then his term
will lapse at that
SPEAKER_02 (05:07):
point.
So that board is weird.
Two people have been kicked offof it.
And the sitting board chair, theonly board member, actually is
termed out.
His calendar has ended.
SPEAKER_01 (05:25):
But like I said, that's not unusual.
I remember other occasions whenthe chair has stayed...
passed their appointment untilthe president could appoint
somebody new and get thatperson's Senate confirmed.
It's probably complicated forthe president to be able to do
that now because he might facesome hurdles in the Senate
(05:47):
because they're not going towant to go, especially on the
Democrat side, they're not goingto want to work to confirm his
replacement for the chair whenthey have two members that have
been dismissed that they don'tbelieve is lawful dismissal.
So that politically gets alittle messy.
So my guess is Chairman Hauptmanwill be there until everything
(06:12):
gets figured out with the othertwo board members.
And once that gets decided bythe courts, then the president
can make a move on who he wantsto replace Chairman Hauptman.
SPEAKER_02 (06:26):
Now, what's the operation, as far as you can
tell?
How is the operation at NCUAaffected by both the board
turmoil and the staffreductions.
And I think something like 15%of the staff was dismissed, if
my memory's right.
SPEAKER_01 (06:45):
Right.
I believe they're at 900 andsomething full-time staff
members.
It's under 1,000, the last I wastold.
There's a lot of functions ofthe NCUA that could be handled
because we have delegatedauthorities.
(07:05):
So the board delegatesauthorities to different
division departments to lead.
Not everything has to go to aboard decision.
So there are a lot of decisionsthat could be made at the
department.
You know, the everydayexamination function, all of
that could be done at thedepartment level.
It could be run by the chair.
(07:26):
The chairman, you know, makesdecisions regarding the call
reports, examinations,supervisory highlights All of
that goes with the chair.
Where it gets a little moredifficult, or actually a lot
more difficult, is if there'sregulations that are proposed
and finalized and you don't havea board quorum.
That's where you're going toface a legal battle if that
(07:47):
happens.
And that hasn't happened yet.
There's only been briefings.
There haven't been any proposedor final regulations.
The budget hasn't been debatedor a new budget voted on.
That's another area where you'regoing to you might face a
challenge if you don't have afull board quorum.
(08:08):
Or if there's appeals, like ifyou're dealing with mergers,
you're dealing with field ofmembership issues, and a credit
union appeals a decision thatwas made at the department
level, that would go to a boardvote.
And if you don't have a quorumthere, then you're going to face
some legal challenge as well.
(08:28):
So when those occasions come up,eventually they will, that's
when it's going to get moremurky just having one individual
on the board representing theentire agency.
And so as soon as we could get afull board or a quorum, at least
two members, which would be aquorum, that's going to make
things, I think, make people alot more comfortable so that
(08:50):
they're not, the agency is notvulnerable to a legal challenge
when some of these decisionshave to be made.
UNKNOWN (08:58):
Yeah.
SPEAKER_02 (08:59):
Yeah, that's interesting.
If the NCUA were to oppose amerger at this point, I think
the credit unions, if theychose, could sue on the grounds
that you just don't have, youcan't do that.
SPEAKER_01 (09:12):
Well, yeah, if you appeal decisions and those
decisions are decided at theboard, with the board.
And if you only have one memberand the one member is saying,
well, I'm one and that's one isa quorum, that's an
interpretation, certainly.
That's certainly aninterpretation of the Federal
Credit Union Act.
Whether a core is going to agreewith that interpretation is
another story i interpret thingsall over the place like i can
(09:35):
interpret things however i wantmy interpretation is not
relevant the court'sinterpretation is what's
relevant so when you exposeyourself to a challenge yeah now
now you're taking it out of thehands of the statute now court's
going to decide that
SPEAKER_02 (09:50):
so the good news and what you're saying is that as
far as you can tell ncoaoperationally is chugging along
as it had without it's like thesky didn't fall down you
SPEAKER_01 (10:04):
know there's a lot of things that could run you
know i don't want to say onautopilot but there is a lot of
aspects of the agency that couldrun with the chair and
SPEAKER_02 (10:13):
with the staff reduction too
SPEAKER_01 (10:14):
oh yeah
SPEAKER_02 (10:15):
yeah you know i i don't some months ago there was
a lot of concern about what theheck i mean i have not heard
panic so far
SPEAKER_01 (10:24):
i i personally have always thought the ncua was a
lean agency uh you know i'veworked at the federal Reserve
Board prior to many years ago.
And even when I worked at theFed, I thought the NCUA was a
lean agency.
I really wish it had moreindividuals working there and
really looking at issues than itdid.
I've always felt this.
(10:45):
We're in a situation wherethey're downsizing the agency.
It's not my decision to do that.
I think they're very capableindividuals there that really
care about credit unions andwant to do good work, and that's
to the industry's advantage.
So in that regard, I thinkthat's a positive.
(11:06):
At the same time, when you havea very lean agency and something
goes wrong, there's only so muchpeople can do.
There's only so much bandwidththe agency has.
So that's what concerns me.
If things are moving great, itdoesn't concern me, but it's
when things aren't.
It's when you have a bigcybersecurity attack or a big
(11:26):
cyber breach, or if somethinghappens and there's a run on
credit unions.
It's when you have theseemergency situations that having
those, the amount of people, theamount of FTEs there really does
make a difference and you couldabsorb the issue.
I think
SPEAKER_02 (11:45):
too, the bank examiner job, first of all,
there are fewer bank examinersnow, so probably be bigger time
between examinations, which isnot a good thing.
And secondly, more tasks havebeen given to the bank examiner.
like to do a technologyoversight thing.
Many of them aren't qualified todo that.
(12:06):
And I'm not putting down.
It's kind of like if you said tome, part of your job is to do a
modern Greek translation of thepodcast.
I'd say, wait, hold up.
Out of my competency here.
There are costs to staffreduction in addition to the
money saved.
There are some costs,unfortunately.
SPEAKER_01 (12:25):
Absolutely.
Absolutely.
I'm hopeful.
I'm hoping that What happens is,you know, they had some
individuals that left, that tookretirement, that took, you know,
buyout, whatever.
And then I know once a hiringfreeze is lifted by the
administration, maybe they couldbring back certain employees
that could work on some of theseareas that they really need
(12:47):
specialty focus on.
And they could then focus wherethey put their resources.
You know, that would be ideal.
But yeah, I mean, it's...
It was always a lean agency andthat always concerned me.
And now it's even leaner.
So it does absolutely concernme.
But I do want to say workingthere, it was some of the most
(13:10):
dedicated individuals I've everworked with in my entire career.
So I have a lot of faith thatthey'll get through this time.
I just don't want to seesomething environmental happen
that is so great that it becomesdifficult for them to absorb it
or deal with it with the limitedresources.
resources.
SPEAKER_02 (13:31):
Now, what's going on at CFPB that credit unions
should be concerned about or atleast take notice of?
SPEAKER_01 (13:40):
With CFPB, the thing that's always concerned me there
is, I mean, that agency iscompletely, I mean, they've lost
like 90% of the agency, probablymaybe even more than that.
They may have maybe a couplehundred people working at CFPB.
And some folks, I'll hear in theindustry find that to be
(14:02):
favorable.
They think, oh, this is great.
The agency was over burdensometo begin with.
It should have never beencreated to begin with.
So we're happy with this.
But the issue is there's a lotof powers, a lot of authority
that provincial regulators hadthat went to the CFPB.
(14:22):
And now the CFPB has thatauthority.
But if the CFPB is not doingthose tasks, no Nobody's doing
those tasks.
They're not going back to thepotential regulator.
And some of that is supervisionover institutions over$10
billion in assets, examinationand supervision over
depositories over$10 billion inassets, non-banks, some of these
(14:43):
other companies.
Pretty much any company thattouches consumer financial
services was under the purviewof the CFPB.
And some of that is good forcredit unions because it's not
right for a credit union to beexamined, supervised regularly
by state examiner by theirfederal prudential regulator.
But then these largeinstitutions, they're not
(15:06):
getting that same supervisionfor consumer financial
protection.
And they're the ones thatpresumably have the greater risk
to the industry.
So that's where I have a hardtime grappling with that.
If the CFPB is not going toexamine these large
institutions, not going to havesupervision over them due to
their staffing limitations, thenwho Who's going to do that?
(15:30):
And if nobody's going to dothat, then why are credit unions
being examined for these things,the ones that are under$10
billion in assets?
Because our prudentialregulators are still there.
They're still doing that job,and there's state regulators
doing it as well.
So that, to me, is not a levelplaying field, first of all.
Also, it doesn't fairly addressrisk, because I'm going to go
(15:50):
out on a limb here and say theconsumer protection issues at a
$50 million credit unionprobably don't have– they're
doing something really out ofcompliance, it probably doesn't
have the same risk to theindustry as JPMorgan Chase doing
something greatly out ofcompliance.
(16:11):
Or
SPEAKER_02 (16:12):
even Silicon Valley Bank.
SPEAKER_01 (16:14):
Right.
Yeah.
I mean, we got to think back towhy, whether you agree or
disagree with the CFPB, thereason for its establishment was
to address the mortgage crisisand what happened there.
That was with largeinstitutions.
So, You know, a lot of theproblems that trickled down and
impacted the smallerinstitutions started with the
big ones.
SPEAKER_02 (16:34):
And credit unions were victims in that process.
SPEAKER_01 (16:37):
That's correct.
Because
SPEAKER_02 (16:38):
they bought bags of mortgage loans that were junk.
SPEAKER_01 (16:43):
Right.
SPEAKER_02 (16:43):
And they bought them from large institutions.
They didn't buy them from a guyin the street corner.
Many credit unions, particularlythe corporate credit unions,
just got kicked to hell in thatdeal and went out of business.
Yeah.
You know, I've talked to CEOs ofa couple of credit unions that
are over to They are regulatedby CFPB.
They had no gripes about it.
(17:03):
Really didn't see it as that.
It wasn't that big a deal tothem.
Whereas other people act as, oh,geez, we have to have lunch with
the Antichrist.
Not according to these people.
It was really not that big adeal.
SPEAKER_01 (17:17):
Yeah.
Nothing's a big deal untilthere's a fire.
You know what I mean?
I don't worry about putting myfire extinguishers everywhere
until there's a fire and I needthat freaking extinguisher.
So that's the issue thatconcerns me.
Same with the NCUA.
We talk about limited staffmembers and when everything's
going fine, there's nothing toworry about.
(17:39):
It's the time when nothing'sgoing fine that you worry and
being prepared for thoseincidents.
And the way we're setting upthis infrastructure, it doesn't
give me a lot of confidence thatwe're prepared for those
incidents.
Does it give me confidence thatwe're prepared for the
day-to-day?
Yeah, pretty much.
I think we could handle theday-to-day.
It's when there's something thatgoes wrong.
(18:00):
And sometimes that's not withinthe control of credit unions.
Sometimes it's a largeinstitution.
Sometimes it's a Silicon Valleybank.
Sometimes it's a JP Morgan.
Sometimes it's a countrywidethings that are outside of the
control of smaller institutions.
Yet the smaller institutions aregoing to face the punishment for
them, you know, in a myriad ofways, whether it's regulatory,
(18:20):
whether it's what happens withconsumers, whether it's anxiety,
you know, the market isextremely emotional.
So things that happen in a largelarge scale trickle down to
impact smaller institutions.
And we've seen this time andtime again.
So when people ask me, or doesit concern me?
None of this really concerns meif things go well, but things
(18:40):
never go well.
There's always something thathappens.
And I don't think we're preparedfor that when that does happen.
That's what concerns me.
SPEAKER_02 (18:48):
Now, another issue is NCUA's Central Liquidity
Enhancement Act.
SPEAKER_01 (18:54):
Yes.
SPEAKER_02 (18:55):
What's that and how, why should credit unions be
interested in that?
SPEAKER_01 (18:59):
This was an issue that when I was at the NCUA, you
know, so I led the Office ofExternal Affairs and
Communications under ChairmanHarker and was his policy
advisor.
This was an issue we reallywanted to see Congress make some
changes on.
And even before I was at NCUA,it was something the NCUA fought
for.
It's really to give someenhancements to the way credit
(19:21):
unions can access the centralliquidity facility.
There were many enhancementsmade temporarily during COVID.
during that time for like two,three year period to deal with
that.
But then they expired.
They sunset.
What we'd like to see at theNCUA is to have these
enhancements permanently.
So it becomes easier for smallercredit unions to access
(19:43):
liquidity through the CLF, goingthrough, you know, agent
members, corporate credit unionsas agent members in particular.
And there's some red tape there,the way the statute's currently
written.
And we kind of wanted to clean alittle bit of that up so that it
allows smaller credit unionseasier access to that liquidity
(20:04):
fund.
So there is legislation rightnow in Congress where they're
going over this issue.
It's such a no-brainer.
It costs taxpayers nothing tosupport this.
It doesn't cost taxpayers anymoney.
And the one piece of legislationright now is the NCUA Central
Liquidity Enhancements Act,S2545.
(20:27):
But this issue has been beenreally advocated for by the NCUA
for a long time.
It was when I was there, all theboard members, Democrat,
Republican, strongly supported.
I know I don't want to speak forthe current chairman, but from
my impression, he's, you know,has supported this and has been,
you know, mentioned it as beingextremely important.
(20:48):
It has support from theindustry.
It has support from, you know,strong support from the agency.
And it's just one of thesechanges that gives a little bit
of a buffers should there be aproblem.
Maybe it's because I'm anattorney and I'm trained to look
for problems.
I'm always trying to, as my momsays, solve the problem before
it happens.
(21:09):
So if there's ever a liquiditycrunch later down the line, this
is already done.
Now, this is not something youfight for in a liquidity crisis.
You fight for it ahead of time.
So when that liquidity crisiseventually comes, smaller credit
unions can access this fundeasier.
But you don't wait for thecrisis.
SPEAKER_02 (21:25):
To boil this down, right now a small credit union
is having a pretty big problem,has a lot of red tape and has to
cut through
SPEAKER_01 (21:34):
to
SPEAKER_02 (21:35):
get money.
And all this is saying is we canenhance and speed up this
process and it's not going toinvolve a heck of a lot of risk.
SPEAKER_01 (21:44):
No, no.
It would just allow corporatecredit unions to act as agent
members for a subset of theircredit unions, which makes it
easier for them to get into thefund and help those members,
which makes it easier forsmaller credit unions to then
access the funds.
Now, there's other CLFenhancements that the NCUA and
(22:04):
the industry have really pushedfor, but this one is just one of
two or three pieces oflegislation that we'd like to
see go through.
And
SPEAKER_02 (22:14):
we're basically talking about...
tiny amounts of money.
This is not consequential to thecredit union industry as a
whole, to the country.
SPEAKER_01 (22:26):
No, there's no taxpayer money in this.
SPEAKER_02 (22:30):
It's just shoveling a little money out the door to a
credit union that's having aliquidity problem.
Doing it fast enough so itactually helps them.
Taking too long can be aproblem.
SPEAKER_01 (22:44):
It
SPEAKER_02 (22:44):
seems like a no-brainer.
SPEAKER_01 (22:46):
It is a no-brainer.
Some people may say, well,Elizabeth, that's not an issue
right now, like I said before.
SPEAKER_02 (22:53):
But it will be.
SPEAKER_01 (22:55):
It will be.
SPEAKER_02 (22:56):
I mean, my heavens, this stuff is cyclical.
SPEAKER_01 (22:59):
That's right.
SPEAKER_02 (23:00):
Every generation has this liquidity problem.
I mean, look at all the SNLsthat went out of business in the
late 80s, early 90s.
And then 2008 rolls around, wehave another liquidity crisis,
blah, blah, blah.
We'll have one.
I mean, I'm I don't have mycrystal ball as cloudy today, so
I'm not predicting when, but wewill have one.
SPEAKER_01 (23:22):
Yeah, and as I think Chairman Harper used to say, you
don't fix the roof when it'sraining.
Well, that's
SPEAKER_02 (23:29):
when everybody wants to fix the roof, but roofers
always tell you you can't comebecause it's got too many costs,
plus it's dangerous to work on awet roof.
Tell me about this genius app.
SPEAKER_01 (23:41):
So, yes, this is one of these issues that I think
we're going to be really talkingabout for a while and I'm
hearing it in the credit unionindustry as well.
And, you know, this was recentlypassed that gives, you know, a
federal regulatory framework forpayment stable coins and is
(24:02):
giving, is sort of creating thisframework so that folks in the
industry, including creditunions, can participate in using
stable coins.
And, you know, this is a newarea.
The Genius Act would assignsupervision to regulators,
including the NCUA for purposesof credit unions, the OCC for
(24:26):
non-banks, the Federal Reserve.
So the NCUA will be looking atregulations on this too, which
is a good opportunity for creditunions to really weigh in on how
they can be really involved inthis new way of having payments
be faster, cheaper, and moreuser-friendly for consumers.
(24:50):
So this is one of those areaswhere credit unions sometimes
have this wait-and-see situationphilosophy on getting involved
in some of these newtechnologies like stable coins.
And I mean, I know there aresome in the industry that are
saying credit unions can'treally afford to sit back and
wait.
They really need to startgetting involved with this and
(25:11):
seeing how they can utilize itfor their membership.
And their membership is perfectfor this because it's community
based.
And this isn't like a Bitcointype of situation where you have
a fluidity regarding what it's,you know, Bitcoin is worth.
These are stable coins.
So they're tied to the dollar.
They're tied to something thatkeeps them stable.
(25:33):
And all it's doing is creatinganother mechanism for money to
transfer with ease and with lesscost.
That's pretty much what you'redoing here.
This is the bread and butter forcredit unions.
Credit unions really should begetting involved in this.
And I know there's someworkshops probably out there.
There's some trainings.
(25:53):
There's some education.
This is a great opportunity forcredit unions to partner with
CUSOs that really have theexpertise in this area.
And I would encourage creditunions to develop as much as
possible and use this as anopportunity to figure out ways
to help their members even moreand use this technology as a way
(26:15):
to help their members even more,especially because, and I'm not
an expert in this, I'm learningit just like everybody else,
probably going to have an impacton interchange.
Now that you have, maybe notquickly, maybe not immediately,
but over time it's going to andThat's a revenue source for
credit unions.
So if they could sort of look atthis issue as a way to help
(26:36):
their consumers make paymentseasier, faster, get involved in
this market, work with CUSOs,this would be a nice avenue for
them, given the structure ofcredit unions, given their
member service philosophy, andgiven the fact that there's
going to be a necessity to lookat other ways to serve their
(26:59):
consumers as other revenuestreams start to diminish like
interchange.
SPEAKER_02 (27:04):
So how would credit
SPEAKER_01 (27:10):
unions get a seat at this table?
I mean, the table is alreadyset.
(27:34):
So there's not provisions put inplace that would make it
difficult for credit unions toget involved in this area.
Some might say, oh, this isreally for bigger institutions.
It's not really something forcredit unions to get involved
in.
They don't know what they'redoing.
That couldn't be further fromthe truth.
This is exactly the type oftechnology credit unions should
be getting involved in.
(27:54):
This is exactly the type ofthing that would really help
their members.
But they do have to have a seatat the table now.
They do have to be communicatingwith their regulator, uh,
learning about the issue, seeingif it's something that they
could work through with CUSOs,and making sure their regulator
is at the table in interagencyconversations on this.
(28:17):
A lot of times...
When there's interagencyrulemakings, and I know this
working at the Fed, the NCUA isnot always the biggest player at
the table.
You know, I mean, that's, youhave the Fed, you have the FDIC,
you have the OCC, whatever.
And then there's the NCUA.
NCUA may not be the biggestplayer there.
In this case, they really haveto be an active voice as these
(28:39):
rules are promulgated.
You know, as much communicationas the agency could give to the
industry and transparency and asmuch involvement as the agency
could, or the industry couldhave in making sure credit
unions are very well representedand that rules favor them will
greatly benefit credit unions inthe long term.
(29:01):
I think one thing that creditunions have to their advantage
is that the current chairmanknows these issues pretty well
and cares about them.
I would leverage that if I werethe industry.
SPEAKER_02 (29:12):
You mentioned a few minutes ago interchange.
What's the status of interchangeright now?
Many credit unions, That isreally essential to their
operations is the money thatthey're making on interchange.
SPEAKER_01 (29:26):
With the Genius Act, if payments become made
primarily through mechanismsthrough stable coins, that could
eventually impact the revenuethat institutions make through
interchange.
I mean, I don't see thathappening overnight, but it
(29:46):
could eventually have an impacton it.
And that's why it's all the moreimportant that credit unions get
involved with issuing stable.
Well, there's this
SPEAKER_02 (29:55):
other bill backed by big merchants like Walmart that
would allow different paymentroutes to come up and in the
process allow significantreductions in interchange.
SPEAKER_01 (30:07):
Yes, right.
And that could have an impact.
Yes, absolutely.
SPEAKER_02 (30:11):
So what's the status of that?
SPEAKER_01 (30:13):
I don't know what the status of that legislation
is, but any of these changes tointerchange, even if nothing
happens with that, just theGenius Act could have an impact
on interchange.
I'm only even thinking aboutthat.
That alone could have an impact.
SPEAKER_02 (30:28):
This Walmart bill, assuming it's not fully
implemented, will come back andwill come back and will come
back.
There's an inevitability tointerchange rates going down.
To me, it's got a union have toprepare for that day.
SPEAKER_01 (30:44):
Here's the lesson.
Whenever you have, ChairmanHarper used to say it's that
overdraft protection and peoplewould misread sometimes what he
was saying.
Whenever you have a way that youmake money, you always have to
make the assumption.
And let's say you'reconcentrated in that way.
Let's say a lot of your revenuecomes from making money by
interchange or by overdraft orby one of these things.
(31:07):
And you become somewhatdependent on that revenue.
You have to prepare for the dayit's going to go away.
I would prepare for the dayplayers in the marketplace won't
(31:44):
be able to achieve the samelevel of revenue that they made
with overdraft that they did inthe past.
So what does that mean?
You have to prepare for thatday.
SPEAKER_02 (31:52):
And this is happening right now.
SPEAKER_01 (31:54):
Absolutely.
And it's going to happen withinterchange too.
SPEAKER_02 (31:57):
With the biggest, some big banks reducing
overdraft fees to next tonothing, or I think in some
cases, nothing.
This is going to trickle downthroughout everything.
You cannot charge$29 for anoverdraft anymore.
I mean, I'm Some institutionsstill are, but those days are
numbered.
SPEAKER_01 (32:16):
You see it in overdraft, you can eventually
see it in interchange.
When you're dependent on feeincome, you always have to have
a game plan to become lessdependent on that in the
occasion that it eventuallybecomes unable to, you become
unable to charge for it.
And that's always going tohappen either by regulation, by
someone in the marketplacecoming and doing something that
(32:39):
changes the market.
And now you can't be competitiveif you charge these types of
fees.
There's a new technology thatmakes those fees, makes the
product obsolete so consumersdon't need it anymore.
Something always comes upeventually.
Blockbuster, we saw it withthat.
Same thing with overdraft.
Same thing with maybeinterchange coming up.
(33:01):
So the lesson here is, well,when or why these things happen,
I don't think is irrelevant.
What's relevant is you have toprepare for if it does what are
you going to do to replace thatrevenue
SPEAKER_02 (33:15):
now on your list of topics and i i love or maybe i
hate this because it's so gotwashington dc alphabet soup that
we have the ncaa voluntary egrpra review i love egr hey ladies
and gentlemen today we're goingto talk about the egr pra review
(33:36):
i hope you brought your noteswhat the heck is this about
SPEAKER_01 (33:40):
okay that's so that's And the reason I like to
bring stuff like this up isbecause it's boring.
No one likes to talk about regreviews.
IGRIPRA is the acronym, and it'swhere the agencies will take a
look at their rules and seewhere they could do some
streamlining, trying to updatethem, modernize their rules,
(34:02):
because the rules are writtenyears ago.
At some point, they becomedated, and we kind of forget
about it, and especially in thisever-evolving industry where
every Everything's changingovernight.
Our rules have to keep up withall of that so that the industry
can work with them.
The NCUA does a one thirdregulatory review every year
(34:24):
where they look at one third oftheir regulations.
So they put out one third oftheir rules for public comment.
What can we change with theseone third?
And they do that every year.
And then they analyze thecomments and they make changes
based on that.
And they actually do it.
A lot of agencies kind of dothat and just kind of it's
academic.
It's an academic exercise.
I don't feel like it's academicat all with the NCUA.
(34:45):
There were a lot of rulemakingsthat have happened because of
these reviews.
And this one is voluntary, wherethe other agencies have to do
it.
The NCUA does it by voluntarynature, and it's the Economic
Growth and Regulatory PaperworkReduction Act, IGREFRA rule,
where they're, again, taking alook at all of their
regulations.
And right now they're lookingat, for this year, they're
(35:07):
looking at three sections.
I think it's consumerprotection, capital, and public
policy.
programs.
It might be the third one.
So I always point this outbecause it's an excellent time
for folks in the industry totake a look at those three
topics, see if there's anythingin the rules that really
troubles them, current NCUAregulations that makes it
(35:27):
difficult to do their job, evenif they're little things.
The little things taken togetheradd up and become big things.
And really communicate withtheir trade associations,
communicate with whoever theyhave doing their advocacy, or
just Write down a letterthemselves to the agency because
the agency reads everything.
Chairman reads everything.
(35:48):
All these folks read everything.
I used to think when I wouldwrite comma letters, who the
heck's going to read this?
I felt like no one's readingthis.
I could tell you, I guaranteeyou, based on my work at the
NCUA, they read everything.
The board members go through allthose letters themselves and
read them.
It's unbelievable.
They really care about thefeedback that the industry gives
(36:08):
them on these things, whetherit's through letters, whether
it's through media, it's alwaysvery helpful to them.
And then they go through thosecommon letters and see what
changes can be made to theregulations that aren't going to
hurt the safety and soundness ofinstitutions, but that are going
to make things easier for creditunions to run.
So I always want to point thisout because it's not sexy.
(36:30):
It's not provocative.
It's not fun.
Like interchange is fun.
Taxation.
These are all fun issues that,you know, we could talk about
and debate and looking atlittle, you know,
detail-oriented regulations orthings at the operational level
that are small, like a deadlinefor getting in a merger
application or board memberchange to your board, the
(36:53):
deadline for that.
Some of these are very minusculechanges, but if they're
problematic for yourinstitution, write them down,
send them to somebody or send aletter yourself by October 8th,
I think is the SIGGRIPRAdeadline, so that the agency can
make these changes and makethings easier for your
institution.
SPEAKER_02 (37:12):
You're making a good point, which is, to an outsider,
to me, all the paperwork at anNCUA seems irrelevant, boring.
On the other hand, this is theessence of the institution.
The institution actually livesby the regulatory rules that are
down there.
If there's stuff in thoseregulations, stuff in the rules
(37:35):
that a credit union doesn'tlike, finds difficult to comply
with and pointless, speak up.
Now's the time.
SPEAKER_01 (37:42):
some might not understand that they're actually
going to be listened to.
When you send in letters, Imean, the NCUA is an agency that
doesn't get typically a ton ofcomment letters.
I mean, if you were in asituation like the CFPB where
you're getting thousands ofletters sometimes on issues or
hundreds or thousands, it mightfeel like, oh, no one's going to
(38:03):
look at my position.
That's not the case there, butit might feel like that.
But even at the NCUA, we getlike 30 letters, 20 letters.
I mean, not a lot of letters onsome of these things.
And I would think to myself,gosh, your industry is really
missing an opportunity herebecause all of these letters are
(38:24):
getting read.
Even the most, you know,seemingly benign recommendation
is getting looked at andanalyzed and could be, you know,
taken into account in anupcoming rulemaking if they
could stick it in something, youknow, stick it in a change that
they're going to make.
It's really an area that's notprovocative and interesting and
(38:45):
fun, but the area where you canreally, even the smallest credit
union, have an amazing impact onthe entire industry.
And I think it gets overlooked.
So whenever you see thesereviews, I can't urge people
enough to figure out what'shappening in your institution
that's problematic.
Tell your trade association,tell whoever works for you on
(39:06):
advocacy, or just write a letterwith that one issue.
You that one issue, say, hey, Idon't have time to analyze the
whole rule, but here's an issuethat really is upsetting to our
credit union that makes our jobsdifficult and put that one
issue.
And then say, I defer to thetrade association on everything
else.
That's fine.
And I wanna point this out,especially because even when I
(39:29):
was at CUNA working onregulatory advocacy, we were
always trying to get feedbackfrom the industry on things that
could make their lives better interms of operations.
And it wasn't always easy to getthat feedback.
You know, as an advocate, I'mnot in the credit union, so I'm
not seeing that day-to-day thateverybody else is seeing.
(39:51):
So that's the other reason whyit's really helpful for credit
unions to pay attention to that.
And
SPEAKER_02 (39:56):
we've proven here that there is still reason for
concern, even though taxation isoff the tape.
Although, as I said earlier,we'll come back.
Before we go, think hard abouthow you Get in touch with me.
(40:40):
This is rjmcgarvey at gmail.com.
Robert McGarvey again.
That's rjmcgarvey at gmail.com.
Get in touch.
We'll figure out a way that youcan help.
We need your support.
We want your support.
We thank you for your support.
The CU 2.0 Podcast.
Welcome to the CU2.0 podcast.
SPEAKER_00 (00:05):
Hi, and welcome to the CU2.0 podcast with big new
ideas about credit unions andconversations about innovative
technology with credit union andfintech leaders.
Woo.
Woo.
SPEAKER_02 (00:36):
Credit unions dodged the threat of loss of their tax
exemption earlier this year, butdon't think all is smooth
sailing for credit unions intoday's turbulent Washington,
D.C.
Lots is happening that mayimpact credit unions large and
small.
On the show is repeat guestElizabeth Ergubian, a lobbyist
with the Defense Credit UnionCouncil among her clients, who
(00:59):
also has served as NCUA Directorof the Office of External
Affairs and Communications and apolicy advisor to Chairman
Harper.
Thank you so much for joiningus.
(01:36):
and NCUA's Central LiquidityEnhancement Act and why this
matters to small credit unionsin particular.
And also there's NCUA'srecurring paperwork review and
how it's an opportunity forcredit unions to seek changes at
the agency.
And yes, she says, NCUAdefinitely reads email sent in
by credit unions.
(01:58):
See, there is a lot happeninginside the Beltway.
Listen up.
Now, with DCUC, your focus isregulatory.
SPEAKER_01 (02:08):
Yes.
SPEAKER_02 (02:10):
As opposed to legislative.
SPEAKER_01 (02:12):
They're a client of Atlas Advocacy, myself, and we
do regulatory advocacy.
We support them in that regard.
Yep.
SPEAKER_02 (02:21):
So that means primarily this would be
interfaced with NCUA, notexclusively, but primarily.
SPEAKER_01 (02:28):
You know, I mean, we help guide them on messaging and
whatnot with The agencies, yeah,NCUA, CFPB, Treasury, SBA,
whatever agency that they'redealing with on certain issues.
And we also look at theregulations, look at the
changes, look at the notices andissue spot for them on things
(02:50):
that would be really importantfor them to pay attention to.
Now,
SPEAKER_02 (02:55):
when last we talked on the table was taxation for
credit unions, that's fallen offthe table, at least for the time
being.
I'm sure it'll come back.
We do have a whole bunch ofissues to discuss.
And one that you put down onyour list is, and it's probably
top of mind for many people, isNCUA board structure.
(03:18):
What the heck's going on there?
So we're down to one member ofthe three-person board.
SPEAKER_01 (03:25):
Right.
SPEAKER_02 (03:25):
What's happening with the other two at this
point?
SPEAKER_01 (03:28):
So the other two have appealed their dismissal,
and that's making its waythrough the court
decision-making process.
And we're seeing that with otherdismissals by the administration
like the FTC member that theTrump administration dismissed.
And the reason these are beinglitigated is because he
dismissed these individuals notfor cause.
(03:53):
And the argument is that that'snot allowed.
He has to be able to have causein order to dismiss them because
based on their role in statuteas an independent agency, they
they can only be removed by thesitting administration if
there's cause.
SPEAKER_02 (04:10):
And specifically with the NCUA, those individuals
were Senate-confirmed?
SPEAKER_01 (04:16):
Yes, Senate-confirmed.
So right now they're waiting.
They're sort of in the processof waiting and letting this run
through the litigation.
And it'll probably go to theSupreme Court.
It'll be decided.
And at that point, we'll knowfor certain whether or not this
administration is dismissal ofthose two board members will be
considered, you know, consistentwith what the statute, the
(04:39):
federal credit union actmandates now.
So that means we have chairmanHoutman who's acting by himself
at the moment and his termsactually up.
I mean, his term was up inAugust, but it's not unusual for
board members and, and chairmanto stay chairman chairwomen to
stay past their term.
So he's there until, you know,it's eventually until the
(05:02):
president appoints somebodyelse.
And that person Senateconfirmed, and then his term
will lapse at that
SPEAKER_02 (05:07):
point.
So that board is weird.
Two people have been kicked offof it.
And the sitting board chair, theonly board member, actually is
termed out.
His calendar has ended.
SPEAKER_01 (05:25):
But like I said, that's not unusual.
I remember other occasions whenthe chair has stayed...
passed their appointment untilthe president could appoint
somebody new and get thatperson's Senate confirmed.
It's probably complicated forthe president to be able to do
that now because he might facesome hurdles in the Senate
(05:47):
because they're not going towant to go, especially on the
Democrat side, they're not goingto want to work to confirm his
replacement for the chair whenthey have two members that have
been dismissed that they don'tbelieve is lawful dismissal.
So that politically gets alittle messy.
So my guess is Chairman Hauptmanwill be there until everything
(06:12):
gets figured out with the othertwo board members.
And once that gets decided bythe courts, then the president
can make a move on who he wantsto replace Chairman Hauptman.
SPEAKER_02 (06:26):
Now, what's the operation, as far as you can
tell?
How is the operation at NCUAaffected by both the board
turmoil and the staffreductions.
And I think something like 15%of the staff was dismissed, if
my memory's right.
SPEAKER_01 (06:45):
Right.
I believe they're at 900 andsomething full-time staff
members.
It's under 1,000, the last I wastold.
There's a lot of functions ofthe NCUA that could be handled
because we have delegatedauthorities.
(07:05):
So the board delegatesauthorities to different
division departments to lead.
Not everything has to go to aboard decision.
So there are a lot of decisionsthat could be made at the
department.
You know, the everydayexamination function, all of
that could be done at thedepartment level.
It could be run by the chair.
(07:26):
The chairman, you know, makesdecisions regarding the call
reports, examinations,supervisory highlights All of
that goes with the chair.
Where it gets a little moredifficult, or actually a lot
more difficult, is if there'sregulations that are proposed
and finalized and you don't havea board quorum.
That's where you're going toface a legal battle if that
(07:47):
happens.
And that hasn't happened yet.
There's only been briefings.
There haven't been any proposedor final regulations.
The budget hasn't been debatedor a new budget voted on.
That's another area where you'regoing to you might face a
challenge if you don't have afull board quorum.
(08:08):
Or if there's appeals, like ifyou're dealing with mergers,
you're dealing with field ofmembership issues, and a credit
union appeals a decision thatwas made at the department
level, that would go to a boardvote.
And if you don't have a quorumthere, then you're going to face
some legal challenge as well.
(08:28):
So when those occasions come up,eventually they will, that's
when it's going to get moremurky just having one individual
on the board representing theentire agency.
And so as soon as we could get afull board or a quorum, at least
two members, which would be aquorum, that's going to make
things, I think, make people alot more comfortable so that
(08:50):
they're not, the agency is notvulnerable to a legal challenge
when some of these decisionshave to be made.
UNKNOWN (08:58):
Yeah.
SPEAKER_02 (08:59):
Yeah, that's interesting.
If the NCUA were to oppose amerger at this point, I think
the credit unions, if theychose, could sue on the grounds
that you just don't have, youcan't do that.
SPEAKER_01 (09:12):
Well, yeah, if you appeal decisions and those
decisions are decided at theboard, with the board.
And if you only have one memberand the one member is saying,
well, I'm one and that's one isa quorum, that's an
interpretation, certainly.
That's certainly aninterpretation of the Federal
Credit Union Act.
Whether a core is going to agreewith that interpretation is
another story i interpret thingsall over the place like i can
(09:35):
interpret things however i wantmy interpretation is not
relevant the court'sinterpretation is what's
relevant so when you exposeyourself to a challenge yeah now
now you're taking it out of thehands of the statute now court's
going to decide that
SPEAKER_02 (09:50):
so the good news and what you're saying is that as
far as you can tell ncoaoperationally is chugging along
as it had without it's like thesky didn't fall down you
SPEAKER_01 (10:04):
know there's a lot of things that could run you
know i don't want to say onautopilot but there is a lot of
aspects of the agency that couldrun with the chair and
SPEAKER_02 (10:13):
with the staff reduction too
SPEAKER_01 (10:14):
oh yeah
SPEAKER_02 (10:15):
yeah you know i i don't some months ago there was
a lot of concern about what theheck i mean i have not heard
panic so far
SPEAKER_01 (10:24):
i i personally have always thought the ncua was a
lean agency uh you know i'veworked at the federal Reserve
Board prior to many years ago.
And even when I worked at theFed, I thought the NCUA was a
lean agency.
I really wish it had moreindividuals working there and
really looking at issues than itdid.
I've always felt this.
(10:45):
We're in a situation wherethey're downsizing the agency.
It's not my decision to do that.
I think they're very capableindividuals there that really
care about credit unions andwant to do good work, and that's
to the industry's advantage.
So in that regard, I thinkthat's a positive.
(11:06):
At the same time, when you havea very lean agency and something
goes wrong, there's only so muchpeople can do.
There's only so much bandwidththe agency has.
So that's what concerns me.
If things are moving great, itdoesn't concern me, but it's
when things aren't.
It's when you have a bigcybersecurity attack or a big
(11:26):
cyber breach, or if somethinghappens and there's a run on
credit unions.
It's when you have theseemergency situations that having
those, the amount of people, theamount of FTEs there really does
make a difference and you couldabsorb the issue.
I think
SPEAKER_02 (11:45):
too, the bank examiner job, first of all,
there are fewer bank examinersnow, so probably be bigger time
between examinations, which isnot a good thing.
And secondly, more tasks havebeen given to the bank examiner.
like to do a technologyoversight thing.
Many of them aren't qualified todo that.
(12:06):
And I'm not putting down.
It's kind of like if you said tome, part of your job is to do a
modern Greek translation of thepodcast.
I'd say, wait, hold up.
Out of my competency here.
There are costs to staffreduction in addition to the
money saved.
There are some costs,unfortunately.
SPEAKER_01 (12:25):
Absolutely.
Absolutely.
I'm hopeful.
I'm hoping that What happens is,you know, they had some
individuals that left, that tookretirement, that took, you know,
buyout, whatever.
And then I know once a hiringfreeze is lifted by the
administration, maybe they couldbring back certain employees
that could work on some of theseareas that they really need
(12:47):
specialty focus on.
And they could then focus wherethey put their resources.
You know, that would be ideal.
But yeah, I mean, it's...
It was always a lean agency andthat always concerned me.
And now it's even leaner.
So it does absolutely concernme.
But I do want to say workingthere, it was some of the most
(13:10):
dedicated individuals I've everworked with in my entire career.
So I have a lot of faith thatthey'll get through this time.
I just don't want to seesomething environmental happen
that is so great that it becomesdifficult for them to absorb it
or deal with it with the limitedresources.
resources.
SPEAKER_02 (13:31):
Now, what's going on at CFPB that credit unions
should be concerned about or atleast take notice of?
SPEAKER_01 (13:40):
With CFPB, the thing that's always concerned me there
is, I mean, that agency iscompletely, I mean, they've lost
like 90% of the agency, probablymaybe even more than that.
They may have maybe a couplehundred people working at CFPB.
And some folks, I'll hear in theindustry find that to be
(14:02):
favorable.
They think, oh, this is great.
The agency was over burdensometo begin with.
It should have never beencreated to begin with.
So we're happy with this.
But the issue is there's a lotof powers, a lot of authority
that provincial regulators hadthat went to the CFPB.
(14:22):
And now the CFPB has thatauthority.
But if the CFPB is not doingthose tasks, no Nobody's doing
those tasks.
They're not going back to thepotential regulator.
And some of that is supervisionover institutions over$10
billion in assets, examinationand supervision over
depositories over$10 billion inassets, non-banks, some of these
(14:43):
other companies.
Pretty much any company thattouches consumer financial
services was under the purviewof the CFPB.
And some of that is good forcredit unions because it's not
right for a credit union to beexamined, supervised regularly
by state examiner by theirfederal prudential regulator.
But then these largeinstitutions, they're not
(15:06):
getting that same supervisionfor consumer financial
protection.
And they're the ones thatpresumably have the greater risk
to the industry.
So that's where I have a hardtime grappling with that.
If the CFPB is not going toexamine these large
institutions, not going to havesupervision over them due to
their staffing limitations, thenwho Who's going to do that?
(15:30):
And if nobody's going to dothat, then why are credit unions
being examined for these things,the ones that are under$10
billion in assets?
Because our prudentialregulators are still there.
They're still doing that job,and there's state regulators
doing it as well.
So that, to me, is not a levelplaying field, first of all.
Also, it doesn't fairly addressrisk, because I'm going to go
(15:50):
out on a limb here and say theconsumer protection issues at a
$50 million credit unionprobably don't have– they're
doing something really out ofcompliance, it probably doesn't
have the same risk to theindustry as JPMorgan Chase doing
something greatly out ofcompliance.
(16:11):
Or
SPEAKER_02 (16:12):
even Silicon Valley Bank.
SPEAKER_01 (16:14):
Right.
Yeah.
I mean, we got to think back towhy, whether you agree or
disagree with the CFPB, thereason for its establishment was
to address the mortgage crisisand what happened there.
That was with largeinstitutions.
So, You know, a lot of theproblems that trickled down and
impacted the smallerinstitutions started with the
big ones.
SPEAKER_02 (16:34):
And credit unions were victims in that process.
SPEAKER_01 (16:37):
That's correct.
Because
SPEAKER_02 (16:38):
they bought bags of mortgage loans that were junk.
SPEAKER_01 (16:43):
Right.
SPEAKER_02 (16:43):
And they bought them from large institutions.
They didn't buy them from a guyin the street corner.
Many credit unions, particularlythe corporate credit unions,
just got kicked to hell in thatdeal and went out of business.
Yeah.
You know, I've talked to CEOs ofa couple of credit unions that
are over to They are regulatedby CFPB.
They had no gripes about it.
(17:03):
Really didn't see it as that.
It wasn't that big a deal tothem.
Whereas other people act as, oh,geez, we have to have lunch with
the Antichrist.
Not according to these people.
It was really not that big adeal.
SPEAKER_01 (17:17):
Yeah.
Nothing's a big deal untilthere's a fire.
You know what I mean?
I don't worry about putting myfire extinguishers everywhere
until there's a fire and I needthat freaking extinguisher.
So that's the issue thatconcerns me.
Same with the NCUA.
We talk about limited staffmembers and when everything's
going fine, there's nothing toworry about.
(17:39):
It's the time when nothing'sgoing fine that you worry and
being prepared for thoseincidents.
And the way we're setting upthis infrastructure, it doesn't
give me a lot of confidence thatwe're prepared for those
incidents.
Does it give me confidence thatwe're prepared for the
day-to-day?
Yeah, pretty much.
I think we could handle theday-to-day.
It's when there's something thatgoes wrong.
(18:00):
And sometimes that's not withinthe control of credit unions.
Sometimes it's a largeinstitution.
Sometimes it's a Silicon Valleybank.
Sometimes it's a JP Morgan.
Sometimes it's a countrywidethings that are outside of the
control of smaller institutions.
Yet the smaller institutions aregoing to face the punishment for
them, you know, in a myriad ofways, whether it's regulatory,
(18:20):
whether it's what happens withconsumers, whether it's anxiety,
you know, the market isextremely emotional.
So things that happen in a largelarge scale trickle down to
impact smaller institutions.
And we've seen this time andtime again.
So when people ask me, or doesit concern me?
None of this really concerns meif things go well, but things
(18:40):
never go well.
There's always something thathappens.
And I don't think we're preparedfor that when that does happen.
That's what concerns me.
SPEAKER_02 (18:48):
Now, another issue is NCUA's Central Liquidity
Enhancement Act.
SPEAKER_01 (18:54):
Yes.
SPEAKER_02 (18:55):
What's that and how, why should credit unions be
interested in that?
SPEAKER_01 (18:59):
This was an issue that when I was at the NCUA, you
know, so I led the Office ofExternal Affairs and
Communications under ChairmanHarker and was his policy
advisor.
This was an issue we reallywanted to see Congress make some
changes on.
And even before I was at NCUA,it was something the NCUA fought
for.
It's really to give someenhancements to the way credit
(19:21):
unions can access the centralliquidity facility.
There were many enhancementsmade temporarily during COVID.
during that time for like two,three year period to deal with
that.
But then they expired.
They sunset.
What we'd like to see at theNCUA is to have these
enhancements permanently.
So it becomes easier for smallercredit unions to access
(19:43):
liquidity through the CLF, goingthrough, you know, agent
members, corporate credit unionsas agent members in particular.
And there's some red tape there,the way the statute's currently
written.
And we kind of wanted to clean alittle bit of that up so that it
allows smaller credit unionseasier access to that liquidity
(20:04):
fund.
So there is legislation rightnow in Congress where they're
going over this issue.
It's such a no-brainer.
It costs taxpayers nothing tosupport this.
It doesn't cost taxpayers anymoney.
And the one piece of legislationright now is the NCUA Central
Liquidity Enhancements Act,S2545.
(20:27):
But this issue has been beenreally advocated for by the NCUA
for a long time.
It was when I was there, all theboard members, Democrat,
Republican, strongly supported.
I know I don't want to speak forthe current chairman, but from
my impression, he's, you know,has supported this and has been,
you know, mentioned it as beingextremely important.
(20:48):
It has support from theindustry.
It has support from, you know,strong support from the agency.
And it's just one of thesechanges that gives a little bit
of a buffers should there be aproblem.
Maybe it's because I'm anattorney and I'm trained to look
for problems.
I'm always trying to, as my momsays, solve the problem before
it happens.
(21:09):
So if there's ever a liquiditycrunch later down the line, this
is already done.
Now, this is not something youfight for in a liquidity crisis.
You fight for it ahead of time.
So when that liquidity crisiseventually comes, smaller credit
unions can access this fundeasier.
But you don't wait for thecrisis.
SPEAKER_02 (21:25):
To boil this down, right now a small credit union
is having a pretty big problem,has a lot of red tape and has to
cut through
SPEAKER_01 (21:34):
to
SPEAKER_02 (21:35):
get money.
And all this is saying is we canenhance and speed up this
process and it's not going toinvolve a heck of a lot of risk.
SPEAKER_01 (21:44):
No, no.
It would just allow corporatecredit unions to act as agent
members for a subset of theircredit unions, which makes it
easier for them to get into thefund and help those members,
which makes it easier forsmaller credit unions to then
access the funds.
Now, there's other CLFenhancements that the NCUA and
(22:04):
the industry have really pushedfor, but this one is just one of
two or three pieces oflegislation that we'd like to
see go through.
And
SPEAKER_02 (22:14):
we're basically talking about...
tiny amounts of money.
This is not consequential to thecredit union industry as a
whole, to the country.
SPEAKER_01 (22:26):
No, there's no taxpayer money in this.
SPEAKER_02 (22:30):
It's just shoveling a little money out the door to a
credit union that's having aliquidity problem.
Doing it fast enough so itactually helps them.
Taking too long can be aproblem.
SPEAKER_01 (22:44):
It
SPEAKER_02 (22:44):
seems like a no-brainer.
SPEAKER_01 (22:46):
It is a no-brainer.
Some people may say, well,Elizabeth, that's not an issue
right now, like I said before.
SPEAKER_02 (22:53):
But it will be.
SPEAKER_01 (22:55):
It will be.
SPEAKER_02 (22:56):
I mean, my heavens, this stuff is cyclical.
SPEAKER_01 (22:59):
That's right.
SPEAKER_02 (23:00):
Every generation has this liquidity problem.
I mean, look at all the SNLsthat went out of business in the
late 80s, early 90s.
And then 2008 rolls around, wehave another liquidity crisis,
blah, blah, blah.
We'll have one.
I mean, I'm I don't have mycrystal ball as cloudy today, so
I'm not predicting when, but wewill have one.
SPEAKER_01 (23:22):
Yeah, and as I think Chairman Harper used to say, you
don't fix the roof when it'sraining.
Well, that's
SPEAKER_02 (23:29):
when everybody wants to fix the roof, but roofers
always tell you you can't comebecause it's got too many costs,
plus it's dangerous to work on awet roof.
Tell me about this genius app.
SPEAKER_01 (23:41):
So, yes, this is one of these issues that I think
we're going to be really talkingabout for a while and I'm
hearing it in the credit unionindustry as well.
And, you know, this was recentlypassed that gives, you know, a
federal regulatory framework forpayment stable coins and is
(24:02):
giving, is sort of creating thisframework so that folks in the
industry, including creditunions, can participate in using
stable coins.
And, you know, this is a newarea.
The Genius Act would assignsupervision to regulators,
including the NCUA for purposesof credit unions, the OCC for
(24:26):
non-banks, the Federal Reserve.
So the NCUA will be looking atregulations on this too, which
is a good opportunity for creditunions to really weigh in on how
they can be really involved inthis new way of having payments
be faster, cheaper, and moreuser-friendly for consumers.
(24:50):
So this is one of those areaswhere credit unions sometimes
have this wait-and-see situationphilosophy on getting involved
in some of these newtechnologies like stable coins.
And I mean, I know there aresome in the industry that are
saying credit unions can'treally afford to sit back and
wait.
They really need to startgetting involved with this and
(25:11):
seeing how they can utilize itfor their membership.
And their membership is perfectfor this because it's community
based.
And this isn't like a Bitcointype of situation where you have
a fluidity regarding what it's,you know, Bitcoin is worth.
These are stable coins.
So they're tied to the dollar.
They're tied to something thatkeeps them stable.
(25:33):
And all it's doing is creatinganother mechanism for money to
transfer with ease and with lesscost.
That's pretty much what you'redoing here.
This is the bread and butter forcredit unions.
Credit unions really should begetting involved in this.
And I know there's someworkshops probably out there.
There's some trainings.
(25:53):
There's some education.
This is a great opportunity forcredit unions to partner with
CUSOs that really have theexpertise in this area.
And I would encourage creditunions to develop as much as
possible and use this as anopportunity to figure out ways
to help their members even moreand use this technology as a way
(26:15):
to help their members even more,especially because, and I'm not
an expert in this, I'm learningit just like everybody else,
probably going to have an impacton interchange.
Now that you have, maybe notquickly, maybe not immediately,
but over time it's going to andThat's a revenue source for
credit unions.
So if they could sort of look atthis issue as a way to help
(26:36):
their consumers make paymentseasier, faster, get involved in
this market, work with CUSOs,this would be a nice avenue for
them, given the structure ofcredit unions, given their
member service philosophy, andgiven the fact that there's
going to be a necessity to lookat other ways to serve their
(26:59):
consumers as other revenuestreams start to diminish like
interchange.
SPEAKER_02 (27:04):
So how would credit
SPEAKER_01 (27:10):
unions get a seat at this table?
I mean, the table is alreadyset.
(27:34):
So there's not provisions put inplace that would make it
difficult for credit unions toget involved in this area.
Some might say, oh, this isreally for bigger institutions.
It's not really something forcredit unions to get involved
in.
They don't know what they'redoing.
That couldn't be further fromthe truth.
This is exactly the type oftechnology credit unions should
be getting involved in.
(27:54):
This is exactly the type ofthing that would really help
their members.
But they do have to have a seatat the table now.
They do have to be communicatingwith their regulator, uh,
learning about the issue, seeingif it's something that they
could work through with CUSOs,and making sure their regulator
is at the table in interagencyconversations on this.
(28:17):
A lot of times...
When there's interagencyrulemakings, and I know this
working at the Fed, the NCUA isnot always the biggest player at
the table.
You know, I mean, that's, youhave the Fed, you have the FDIC,
you have the OCC, whatever.
And then there's the NCUA.
NCUA may not be the biggestplayer there.
In this case, they really haveto be an active voice as these
(28:39):
rules are promulgated.
You know, as much communicationas the agency could give to the
industry and transparency and asmuch involvement as the agency
could, or the industry couldhave in making sure credit
unions are very well representedand that rules favor them will
greatly benefit credit unions inthe long term.
(29:01):
I think one thing that creditunions have to their advantage
is that the current chairmanknows these issues pretty well
and cares about them.
I would leverage that if I werethe industry.
SPEAKER_02 (29:12):
You mentioned a few minutes ago interchange.
What's the status of interchangeright now?
Many credit unions, That isreally essential to their
operations is the money thatthey're making on interchange.
SPEAKER_01 (29:26):
With the Genius Act, if payments become made
primarily through mechanismsthrough stable coins, that could
eventually impact the revenuethat institutions make through
interchange.
I mean, I don't see thathappening overnight, but it
(29:46):
could eventually have an impacton it.
And that's why it's all the moreimportant that credit unions get
involved with issuing stable.
Well, there's this
SPEAKER_02 (29:55):
other bill backed by big merchants like Walmart that
would allow different paymentroutes to come up and in the
process allow significantreductions in interchange.
SPEAKER_01 (30:07):
Yes, right.
And that could have an impact.
Yes, absolutely.
SPEAKER_02 (30:11):
So what's the status of that?
SPEAKER_01 (30:13):
I don't know what the status of that legislation
is, but any of these changes tointerchange, even if nothing
happens with that, just theGenius Act could have an impact
on interchange.
I'm only even thinking aboutthat.
That alone could have an impact.
SPEAKER_02 (30:28):
This Walmart bill, assuming it's not fully
implemented, will come back andwill come back and will come
back.
There's an inevitability tointerchange rates going down.
To me, it's got a union have toprepare for that day.
SPEAKER_01 (30:44):
Here's the lesson.
Whenever you have, ChairmanHarper used to say it's that
overdraft protection and peoplewould misread sometimes what he
was saying.
Whenever you have a way that youmake money, you always have to
make the assumption.
And let's say you'reconcentrated in that way.
Let's say a lot of your revenuecomes from making money by
interchange or by overdraft orby one of these things.
(31:07):
And you become somewhatdependent on that revenue.
You have to prepare for the dayit's going to go away.
I would prepare for the dayplayers in the marketplace won't
(31:44):
be able to achieve the samelevel of revenue that they made
with overdraft that they did inthe past.
So what does that mean?
You have to prepare for thatday.
SPEAKER_02 (31:52):
And this is happening right now.
SPEAKER_01 (31:54):
Absolutely.
And it's going to happen withinterchange too.
SPEAKER_02 (31:57):
With the biggest, some big banks reducing
overdraft fees to next tonothing, or I think in some
cases, nothing.
This is going to trickle downthroughout everything.
You cannot charge$29 for anoverdraft anymore.
I mean, I'm Some institutionsstill are, but those days are
numbered.
SPEAKER_01 (32:16):
You see it in overdraft, you can eventually
see it in interchange.
When you're dependent on feeincome, you always have to have
a game plan to become lessdependent on that in the
occasion that it eventuallybecomes unable to, you become
unable to charge for it.
And that's always going tohappen either by regulation, by
someone in the marketplacecoming and doing something that
(32:39):
changes the market.
And now you can't be competitiveif you charge these types of
fees.
There's a new technology thatmakes those fees, makes the
product obsolete so consumersdon't need it anymore.
Something always comes upeventually.
Blockbuster, we saw it withthat.
Same thing with overdraft.
Same thing with maybeinterchange coming up.
(33:01):
So the lesson here is, well,when or why these things happen,
I don't think is irrelevant.
What's relevant is you have toprepare for if it does what are
you going to do to replace thatrevenue
SPEAKER_02 (33:15):
now on your list of topics and i i love or maybe i
hate this because it's so gotwashington dc alphabet soup that
we have the ncaa voluntary egrpra review i love egr hey ladies
and gentlemen today we're goingto talk about the egr pra review
(33:36):
i hope you brought your noteswhat the heck is this about
SPEAKER_01 (33:40):
okay that's so that's And the reason I like to
bring stuff like this up isbecause it's boring.
No one likes to talk about regreviews.
IGRIPRA is the acronym, and it'swhere the agencies will take a
look at their rules and seewhere they could do some
streamlining, trying to updatethem, modernize their rules,
(34:02):
because the rules are writtenyears ago.
At some point, they becomedated, and we kind of forget
about it, and especially in thisever-evolving industry where
every Everything's changingovernight.
Our rules have to keep up withall of that so that the industry
can work with them.
The NCUA does a one thirdregulatory review every year
(34:24):
where they look at one third oftheir regulations.
So they put out one third oftheir rules for public comment.
What can we change with theseone third?
And they do that every year.
And then they analyze thecomments and they make changes
based on that.
And they actually do it.
A lot of agencies kind of dothat and just kind of it's
academic.
It's an academic exercise.
I don't feel like it's academicat all with the NCUA.
(34:45):
There were a lot of rulemakingsthat have happened because of
these reviews.
And this one is voluntary, wherethe other agencies have to do
it.
The NCUA does it by voluntarynature, and it's the Economic
Growth and Regulatory PaperworkReduction Act, IGREFRA rule,
where they're, again, taking alook at all of their
regulations.
And right now they're lookingat, for this year, they're
(35:07):
looking at three sections.
I think it's consumerprotection, capital, and public
policy.
programs.
It might be the third one.
So I always point this outbecause it's an excellent time
for folks in the industry totake a look at those three
topics, see if there's anythingin the rules that really
troubles them, current NCUAregulations that makes it
(35:27):
difficult to do their job, evenif they're little things.
The little things taken togetheradd up and become big things.
And really communicate withtheir trade associations,
communicate with whoever theyhave doing their advocacy, or
just Write down a letterthemselves to the agency because
the agency reads everything.
Chairman reads everything.
(35:48):
All these folks read everything.
I used to think when I wouldwrite comma letters, who the
heck's going to read this?
I felt like no one's readingthis.
I could tell you, I guaranteeyou, based on my work at the
NCUA, they read everything.
The board members go through allthose letters themselves and
read them.
It's unbelievable.
They really care about thefeedback that the industry gives
(36:08):
them on these things, whetherit's through letters, whether
it's through media, it's alwaysvery helpful to them.
And then they go through thosecommon letters and see what
changes can be made to theregulations that aren't going to
hurt the safety and soundness ofinstitutions, but that are going
to make things easier for creditunions to run.
So I always want to point thisout because it's not sexy.
(36:30):
It's not provocative.
It's not fun.
Like interchange is fun.
Taxation.
These are all fun issues that,you know, we could talk about
and debate and looking atlittle, you know,
detail-oriented regulations orthings at the operational level
that are small, like a deadlinefor getting in a merger
application or board memberchange to your board, the
(36:53):
deadline for that.
Some of these are very minusculechanges, but if they're
problematic for yourinstitution, write them down,
send them to somebody or send aletter yourself by October 8th,
I think is the SIGGRIPRAdeadline, so that the agency can
make these changes and makethings easier for your
institution.
SPEAKER_02 (37:12):
You're making a good point, which is, to an outsider,
to me, all the paperwork at anNCUA seems irrelevant, boring.
On the other hand, this is theessence of the institution.
The institution actually livesby the regulatory rules that are
down there.
If there's stuff in thoseregulations, stuff in the rules
(37:35):
that a credit union doesn'tlike, finds difficult to comply
with and pointless, speak up.
Now's the time.
SPEAKER_01 (37:42):
some might not understand that they're actually
going to be listened to.
When you send in letters, Imean, the NCUA is an agency that
doesn't get typically a ton ofcomment letters.
I mean, if you were in asituation like the CFPB where
you're getting thousands ofletters sometimes on issues or
hundreds or thousands, it mightfeel like, oh, no one's going to
(38:03):
look at my position.
That's not the case there, butit might feel like that.
But even at the NCUA, we getlike 30 letters, 20 letters.
I mean, not a lot of letters onsome of these things.
And I would think to myself,gosh, your industry is really
missing an opportunity herebecause all of these letters are
(38:24):
getting read.
Even the most, you know,seemingly benign recommendation
is getting looked at andanalyzed and could be, you know,
taken into account in anupcoming rulemaking if they
could stick it in something, youknow, stick it in a change that
they're going to make.
It's really an area that's notprovocative and interesting and
(38:45):
fun, but the area where you canreally, even the smallest credit
union, have an amazing impact onthe entire industry.
And I think it gets overlooked.
So whenever you see thesereviews, I can't urge people
enough to figure out what'shappening in your institution
that's problematic.
Tell your trade association,tell whoever works for you on
(39:06):
advocacy, or just write a letterwith that one issue.
You that one issue, say, hey, Idon't have time to analyze the
whole rule, but here's an issuethat really is upsetting to our
credit union that makes our jobsdifficult and put that one
issue.
And then say, I defer to thetrade association on everything
else.
That's fine.
And I wanna point this out,especially because even when I
(39:29):
was at CUNA working onregulatory advocacy, we were
always trying to get feedbackfrom the industry on things that
could make their lives better interms of operations.
And it wasn't always easy to getthat feedback.
You know, as an advocate, I'mnot in the credit union, so I'm
not seeing that day-to-day thateverybody else is seeing.
(39:51):
So that's the other reason whyit's really helpful for credit
unions to pay attention to that.
And
SPEAKER_02 (39:56):
we've proven here that there is still reason for
concern, even though taxation isoff the tape.
Although, as I said earlier,we'll come back.
Before we go, think hard abouthow you Get in touch with me.
(40:40):
This is rjmcgarvey at gmail.com.
Robert McGarvey again.
That's rjmcgarvey at gmail.com.
Get in touch.
We'll figure out a way that youcan help.
We need your support.
We want your support.
We thank you for your support.
The CU 2.0 Podcast.
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