CUNA questions extent, reasons behind NCUA proposed budget increase

NCUA’s proposed 2024 budget represents a very significant increase from 2023 and CUNA is concerned with both the extent of and the reasons for the increase, CUNA Chief Economist Mike Schenk said at NCUA’s budget meeting Thursday.

Schenk, along with NAFCU Chief Economist Curt Long, Virginia Credit Union League President/CEO Carrie Hunt, GoWest Credit Union Association Vice President of Regulatory Advocacy John Trull, and National Association of State Credit Union Supervisors Senior Vice President of Policy and Supervision John Kolhoff, presented at the briefing.

NCUA’s proposed 2024 budget reflects 9.5% increase in expenditures overall compared to the 2023 Board-approved budget, while the Operating Budget (which accounts for 97% of total agency expenditures) reflects an increase of 11%.

“We support the addition of certain proposed positions. However, as discussed in our written comments we have significant concerns with the level and focus of proposed additional staff, including regional specialists to focus on consumer financial protection,” Schenk said. “In a similar vein, we believe the agency’s call for additional examiners for large credit unions should be met with a reduction in examiner focus on small credit unions, providing relief in the form of examination flexibility.”

He added that CUNA has significant concerns around expanding NCUA’s consumer protection examination activity without detailed reasons to do so.

“Credit union members need no significant additional investment of NCUA resources to protect them from the institutions they own. Rules, regulations, and examinations should be tailored so they are not overly burdensome on credit unions,” Schenk said.

NAFCU Chief Economist Curt Long offered a set of principles NAFCU believes would enhance efficiency of NCUA’s budget.

“The NCUA budget continues to increase and this draft budget overlooks opportunities to incorporate more efficient processes with potential cost savings. Continuing this trajectory of substantially increasing budgets is unsustainable and will have serious consequences of the credit unions that fund the NCUA,” he said. “NAFCU recommends that the CAN embrace the importance of cost efficiency and prudent financial management by cutting unnecessary budget items like the addition of dozens of new examination staff.”

Hunt noted three key areas of concern during her testimony: cybersecurity, the agency’s allocation of resources as it relates to serving credit unions of every size, and increased scrutiny on consumer compliance.

“I do not understand how credit unions will continue to thrive with the ever-increasing cost of doing business and additional regulatory scrutiny," noted Hunt. "Credit unions need to provide services in the way that their members want those services delivered and this costs money. Under the CFPB’s war on fees, credit unions question whether they will even be able to charge for services in the future. Fraud is skyrocketing. Staffing costs are dramatically increasing. Cyber threats are increasing, and consumers are demanding more. Additional regulation and exams will only serve to diminish what credit unions can provide."

Trull questioned the size of the budget increases and providedg specific suggestions on areas of the budget the agency should more closely scrutinize. He was was supported by a delegation of credit union leaders from GoWest states in town for D.C. visits.

“Such a significant increase in spending does not seem to recognize current sensitivities, especially considering the economic pressures facing both the credit union industry and the people it serves. The agency’s track record of revising the overall budget downward during the annual mid-year review is commendable, and it is our expectation that this tradition of financial stewardship will be upheld,” he said. “In these times of fiscal uncertainty, it is crucial that every increase is carefully analyzed to ensure that the NCUA’s actions continue to reflect a balance between strategic development and cost-effective operation.’

Kolhoff thanked NCUA for continuing to conduct the annual meeting on the budget and noted it “may be prudent [for NCUA] to follow other state and federal regulatory agencies and raise the asset threshold requirements for annual examinations to preserve resources and reduce regulatory burden without materially increasing risk to the share insurance fund.”

The NCUA board also conducted its November board meeting prior to the budget briefing. Coverage of that meeting can be found here.