WASHINGTON (6/24/15)--The National Association of State Credit Union Supervisors (NASCUS) released a new legal opinion Tuesday. It holds that the National Credit Union Administration's "overhead transfer rate" (OTR) process and decisions should be subject to notice and comment requirements under federal law.
As part of the NCUA's overall budgeting process, the OTR refers to the percentage of funds that the NCUA annually transfers to its operating budget from the National Credit Union Share Insurance Fund (NCUSIF) to cover expenses of the agency.
NASCUS President/CEO Lucy Ito, when releasing the analysis, said it confirms that OTR substantially affects the dual chartering system of state and federal credit unions.
“As the analysis points out, by shifting a portion of federal credit unions’ share of NCUA expenses to the NCUSIF, the OTR reduces out-of-pocket expenses incurred by federal credit unions,” Ito said. “Our fundamental point is that the resulting reduction in federal credit union operating fees provides a singular advantage to those credit unions, and adversely affects the competitive position of state charters relative to federal charters.”
CUNA opposes any overhead transfer of agency expenses to the NCUSIF that are not legitimate, substantiated, insurance-related costs, consistent with fairness to state and federal credit unions and the Federal Credit Union Act. CUNA maintains the NCUA should fully communicate its OTR analysis and proposals to the credit union community in a timely manner prior to setting a new rate.
NASCUS' Ito also said the analysis, prepared by the law firm of Schwartz & Ballen, LLP, found that NCUA’s adoption of the OTR constitutes a “major rule” subject to the Administrative Procedure Act (“APA”) notice and comment requirements. Ito said a "major rule" indicates the agency action will have a substantial impact on costs, prices, or competition in the industry, and specifically requires the agency to consider the costs and benefits of the rule, and any possible alternatives.
The NCUA responded to the NASCUS release. NCUA Public Relations Specialist John Fairbanks stated, "We recognize the setting of the Overhead Transfer Rate is an important issue for all federally insured credit unions. We, therefore, have regularly reviewed and received stakeholder input and independent third-party analysis on the OTR methodology since the current methodology was adopted in 2001 and most recently in 2011. NCUA also is in compliance with the Administrative Procedure Act.
"Nevertheless, NCUA will carefully consider the NASCUS study’s conclusions to determine whether more formalized stakeholder input about the OTR methodology is warranted."
CUNA strongly advocates for increased transparency in the NCUA budget process and, like NASCUS, backs Senate (S. 924) and House (H.R. 2287) bills that would require the NCUA to open its budget process to the public. CUNA has said an open process would increase agency transparency and accountability.