Credit unions were already having a good week last week with Congress taking steps to roll back portions of the Dodd-Frank Act, and that was topped off by introduction of bipartisan legislation in the House that would delay implementation of the National Credit Union Administration’s risk-based capital rule.

The bill, introduced by Reps. Bill Posey, R-Fla., and Denny Heck, D-Wash., would move the RBC rule’s implementation date from Jan. 1, 2019, to 2021.

Last fall, Heck and Posey reintroduced a similar bill. The current proposal delays implementation of the rule rather than killing it outright, as other bills have sought to do. Heck is one of the few lawmakers serving in Congress to have worked in a credit union.

U.S. Rep. Denny Heck (D-Wa.)
U.S. Rep. Denny Heck (D-Wa.) addressing the crowd at the 2017 CUNA GAC. Heck is one of the few members of Congress to have worked at a credit union.

Credit union trade associations were quick to heap praise on the pair for the move to delay RBC.

NAFCU President and CEO Dan Berger addresses the crowd during the trade association's 2017 Congressional Caucus in Washington.
NAFCU President and CEO Dan Berger, seen here during the trade association's 2017 Congressional Caucus in Washington. Photo by Kevin Dietsch

Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions, commended the two lawmakers for introducing NAFCU-supported legislation.

“NAFCU thanks Rep. Posey and Rep. Heck for their leadership in acknowledging the harmful impacts the RBC rule would have on the credit union industry and working with credit unions to address this problem,” Berger said in a statement. “If the RBC rule is allowed to take effect as written, more than 400 credit unions would see a decline in their capital cushions. A two-year delay in the rule would give the NCUA time to fix the rule and credit unions more time to comply.”

Jim Nussle, CUNA
Jim Nussle, president & CEO of CUNA

Jim Nussle, president and CEO of the Credit Union National Association, said: “CUNA supports legislative efforts to delay implementation of the NCUA’s risk-based capital rule. The RBC rules enacted under Dodd Frank were not intended by Congress to apply to credit unions. Credit unions are member-owned, Main Street, financial cooperatives that were not responsible for the financial meltdown and should not pay, literally and figuratively, for the sins of Wall Street and the excessive risk taking on the part of big banks.”

And while previous efforts to delay or otherwise change RBC have made little or no progress in Congress, there is a sense among some analysts that this one could be different.

John McKechnie
John McKechnie, credit union consultant and partner at Total Spectrum

John McKechnie, a credit union consultant and partner at Total Spectrum, and a former staffer at both NCUA and CUNA, said there is a good chance the bill could find traction given the current climate on Capitol Hill.

“Congressman Posey has always been very attuned to the problems with the RBC rule; his credit union constituency has made sure of that,” McKechnie told Credit Union Journal. “Now, given that Congress seems to be in a regulatory relief mode, this just might find its way into the just-passed Senate bill. There seems to be solid bipartisan support for this approach. I’m optimistic.”

Consistent opposition

Over the past three years, NAFCU pointed out, the trade group has “consistently opposed” NCUA’s RBC rulemaking and urged its withdrawal because of the “adverse effects it would have on the credit union industry – particularly as a result of regulatory burdens and costs.”

In December 2017, NAFCU witness Brian Ducharme, president and CEO of MIT Federal Credit Union, Cambridge, Mass., testified before the House Financial Institutions Subcommittee. In his testimony, Ducharme said studies on risk-based capital have found such requirements “are not appropriate for smaller banks and credit unions” because of their complexity, and “will likely impede economic growth without reductions in systemic risk.”

Also in December, NAFCU sent a letter to House Financial Services Committee Chairman Jeb Hensarling and Ranking Member Maxine Waters saying that credit unions would have to “constrain lending” this year to come into compliance with the rule if it is to take effect in 2019.

That same month, the House Financial Services Committee approved NAFCU-backed legislation – also sponsored by Posey – to repeal the NCUA’s RBC rule. The bill now awaits House action.

Information from NCUA on how credit unions can prepare for the rule is available here.