Two Reg Revisions to Watch

Stay informed about rule changes for debit card interchange fees and corporate CUs.

February 1, 2011

While any rule change can be a pain in the neck, the number of regulatory revisions for this year isn’t on pace to set a record. It’s highly likely 2011, however, will be a different story under the new Dodd-Frank Wall Street Reform and Consumer Protection Act. (Even so, credit unions will fare far better under the act than will banks, which will be subject to a larger number of, and more intrusive, rules.)

Whatever the number, two rule changes in particular will have significant effects on credit unions:

1. The developing rule on debit card interchange fees, which the Federal Reserve Board is expected to issue in December. The rule would take effect in April 2011.

About 70% of all credit unions offer debit cards. The Credit Union National Association (CUNA) has been working hard through our Interchange Issues Working Group to identify problems created by the new interchange law, which is part of Dodd-Frank. We’re communicating our concerns to the Fed well in advance of the new proposal.

While credit unions with assets of less than $10 billion (all but three credit unions are in this group) are exempt from the rule coverage, there’s a grave concern the rule’s effect on the treatment of debit card transactions will negatively affect all credit unions offering debit cards. In coming weeks, credit unions will certainly hear more from CUNA about that proposal, already the subject of important litigation from TCF Bank. A summary of the legal claims TCF Bank is raising and concerns we’ve highlighted with the Fed are available on CUNA’s website.

2. The corporate credit union rule, which the National Credit Union Administration (NCUA) Board approved in September. We won’t feel the full impact of the rule until well into the future. The new capital standards of corporate credit unions, for example, that include 4% net worth requirements for all adequately capitalized corporate credit unions, don’t begin to take effect until October 2011. More important, capital component requirements, such as 45 basis points of retained earnings, won’t begin for three years.

NCUA, however, is informing corporate credit unions that if they aren’t already developing plans for anticipated changes to their business models and how they’ll make sure to meet capital requirements on time, they must do so by the end
of this year.

NCUA also is directing natural-person credit unions to develop their own plans to ensure they have access to needed financial services, which could include working with a well-managed corporate credit union.

More regulation of corporate credit unions is definitely coming. Comments closed in November on NCUA guidance for chartering new corporate credit unions, which might be an option for dealing with some of the conserved corporates.

NCUA also will solicit comments on additional proposals to address whether:

  • Privately insured credit unions that use corporate credit unions should share in assessments to NCUA’s corporate stabilization fund to help pay for the financial assistance to the corporate credit union system;
  • Corporate credit unions should be able to charge annual or membership fees; and
  • Natural-person credit unions should be limited to membership in only one corporate credit union.

Other proposals are also in the works. CUNA’s Corporate Credit Union Next Steps Working Group will take the lead in developing comments, and will monitor closely NCUA’s implementation of the corporate credit union rule.

Meanwhile, CUNA is well aware of the general and growing angst many credit unions feel about their overall regulatory burdens. Even regulations not written specifically for natural-person credit unions can have significant effects on their operations.

Containing these requirements is at the top of our list in every meeting we have with key regulators, and we’ll continue to develop meaningful approaches to corralling this menace.

MARY MITCHELL DUNN is senior vice president/deputy general counsel for the Credit Union National Association. Contact her at 202-508-6736 or