DENVER-State regulators continue to fight what they call federal encroachment on their authority.

It's a tension that's nearly as old as credit unions themselves. But state regulators argue that a wave of new rules from NCUA are further eroding the dual chartering system.

During the NASCUS State System Summit here, Credit Union Journal met with Mary Martha Fortney, president and CEO of NASCUS, Orla Beth Peck, Supervisor of Credit Unions for Utah and NASCUS chairman, and, Catherine Tierney, president and CEO of Community First CU, Appleton, Wis., and chairman of the NASCUS Credit Union Executive Council.

Fortney said NASCUS interacts regularly with NCUA and "values" the working relationship the two have, "but it is our job and our role to say too much is too much."

"Choice is important," Fortney said. "The United States is the only country that has dual chartering for financial institutions. But proposed federal regulations are building up, increasing more and more. The state regulators know their credit unions, and the preemption of state regulations and oversight by increased federal regulation is a big issue."

State regulatory authority over CUs is "eroding," Peck stated flatly.


An Issue For CUs & Regulators

"This issue is a big concern to state regulators and state-chartered credit unions alike," Peck told CU Journal. "If NCUA has rules that apply to everybody it limits the state regulators' opportunity to offer an alternative tailored to local conditions."

Added Tierney: "It makes both systems strong to have a choice. There are only three federal chartered credit unions in Wisconsin. The state charter is the charter of choice due to innovation and field of membership rules. We are all for safety and soundness, but sometimes the federal rules supersede the state rules."


Conflicting Regs

As an example, Peck pointed to the CUSO rules NCUA attempted to implement last year. While the federal regulator lacked the authority to examine CUSOs owned by federal chartered credit unions, Peck said Utah already has that authority, as do most states.

"But the CUSO rule NCUA wanted superseded all rules. We had a CUSO rule that was unique to the situation in our state."

Similarly, Peck said Utah has had a loan participation rule in place for 15 years. "So when NCUA proposed a loan participation rule we felt we did not need NCUA to come in with a rule that superseded ours."

NCUA Chairman Debbie Matz, as well as other representatives from the federal regulator, attended the NASCUS Summit. Fortney said there was constructive communication between the two parties, and Chairman Matz was able to give state regulators a clear picture of NCUA's intentions.

"NCUA wants to listen," Fortney said. "Their senior staff and regional directors discussed substantive issues. But the state regulators feel the volume of regulations and have a sense of frustration over preemption. There have been some successes, and we try to help NCUA understand its role-there is a difference between being a charterer and an insurer."

Peck said NASCUS is working on separating what rules state chartered CUs have to comply with. She said it would be "helpful" if these rules were consolidated in one section, as there is confusion on the part of CUs and examiners alike. Said Fortney, "We will continue to review proposals and will have continual discussion with NCUA. It is best to find a solution."

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