news.cuna.org/articles/110171-cuna-seeks-fair-distribution-of-otr-operating-fee-charges

CUNA seeks 'fair distribution' of OTR, operating fee charges

April 27, 2016

CUNA commended the NCUA for opening its overhead transfer rate (OTR) and operating fee methodology for public comment and offered an alternate OTR model that would result in a lower rate. CUNA has pushed for this transparency for a number of years.

In its Tuesday letter, CUNA noted that it does not have the intent, nor should the NCUA have the intent, to benefit federal credit unions over state-chartered credit unions, or vice versa.

“CUNA represents both federal and state credit unions,” the letter reads. “Our goal is to ensure a fair distribution of the charges for the supervision of credit unions consistent with the Federal Credit Union Act.”

CUNA has long held that any overhead transfer of agency expenses to the National Credit Union Share Insurance Fund should be legitimate, substantiated “insurance-related” costs, consistent with fairness to state and federal credit unions and the Federal Credit Union Act.

The NCUA’s operating budget has two primary funding mechanisms: the OTR, which is funded by all federally insured credit unions; and the operating fee, funded only by federal credit unions.

The current OTR methodology has been in place since 2003, but with changes in definitions and interpretations, the OTR has risen to 73.1% in 2016 from 52% in 2008. This rise has occurred despite a dramatic decline in the number of troubled credit unions.

CUNA’s alternative calculation would bring an OTR in the range of 62% to 67%. Under CUNA’s approach, federal credit unions would be responsible for the costs of routine exams by NCUA examiners the same way state credit unions have to fund routine exams by their state examiners.

CUNA’s letter also urges the agency to make greater use of the work papers of state examiners in evaluating federally insured state credit unions. Doing so would reduce both the OTR and the overall NCUA budget.

The operating fee methodology is used to determine the aggregate amount of operating fees charged to federal credit unions: almost all NCUA expenses not covered by the OTR must be generated by operating fees. The higher the OTR, the lower are FCU operating fees, although federal credit unions incur just over half of the cost of the OTR since they represent about 52% of insured shares.