CUNA comments on NCUA proposal on combination transactions

March 25, 2020

While CUNA supports the majority of NCUA’s proposed rule on bank-credit union combination transactions, there are aspects not statutorily required, several of which may be problematic, CUNA wrote to NCUA Wednesday. NCUA is accepting comments on the proposal through March 30.

“The proposal essentially codifies current requirements and practices related to combination transactions with non-credit unions. While the proposal does not introduce much that is new, we believe codifying and centralizing the existing requirements will aid credit unions pursuing such transactions,” the letter reads. “Many of the elements of the proposal come from existing requirements, such as statutory factors the NCUA must weigh when considering an application for a combination transaction.”

In its letter, CUNA disagrees with the proposed approach to exclude a limit on the length of time the NCUA may take to consider a combination transaction.

“We urge the agency to adopt a specified timeframe, which is critical for planning purposes. Timing is of utmost importance in any manner of merger or other combination transaction, including those with non-credit union entities,” the letter reads. “We recommend the NCUA apply an approach consistent with that of the Federal Deposit Insurance Corporation, which maintains an established timeframe of generally 60 days to respond to combination transaction applications. It is important to maintain parity in this instance since non-credit union entities often consider transacting with non-credit unions (in addition to credit unions). We urge the NCUA to limit the length of time for which it can consider a combination transaction; we suggest a limit of 60 days to maintain consistency with the FDIC.”

CUNA also does not support the proposed requirement for bank customers to, prior to closing of the transaction, affirmatively consent to becoming members of the credit union.

“The proposed requirement to obtain an affirmative act—whether an authoritative vote or individual consent—will be an extremely onerous task, creating a huge burden for applying credit unions. To address this issue, we suggest the NCUA instead allow an optout,” the letter reads. “This would allow the applying credit union to inform all bank customers that they will become members of the credit union unless they take action to opt out.” The letter also states that NCUA should consider whether such affirmative act (or even an opt-out) would achieve its objective in the context of a non-credit union transaction, and, if not, whether to eliminate this requirement entirely.