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NCUA Chairman Todd M. Harper Remarks at the CUNA Midwest Small Credit Union Conference

May 2023
NCUA Chairman Todd M. Harper Remarks at the CUNA Midwest Small Credit Union Conference

As Prepared for Delivery on May 22, 2023

Good afternoon, everyone. And, thank you, John, for that introduction, as well as for the opportunity to speak last week with the Indiana Credit Union League. As a proud Hoosier and a native Midwesterner, I regret that I cannot be there in person today.

Credit Union System Safety and Soundness

Without question, the issue of financial stability at depository institutions has dominated recent news cycles. Naturally, this has led to questions about the impact these events will have on the NCUA, credit unions, and their members, as well as the overall financial system. The recent turmoil in the banking system is a reminder of the need to manage risks related to capital, interest rates, liquidity, and credit. That is why they were all highlighted as areas of focus in the NCUA’s supervisory priorities for the last several years.

As always, the NCUA is committed to protecting credit union members and the safety and soundness of the credit union system. In fact, no one has ever lost a single penny of insured share deposits within the credit union system. And, maintaining your members’ confidence applies to both protecting their savings and ensuring their safe, fair, and affordable access to financial products and services.

Overdraft Programs

And, as part of that mission and commitment, many credit unions are considering how to restructure their overdraft programs or even drop overdraft fees entirely. These decisions will require adjustments to revenue expectations, especially as overdraft fees comprises a sizable proportion of non-interest income at some credit unions.

In my view, the overdraft fees charged by some federal credit unions can be detrimental to members and are inconsistent with credit unions’ mission of meeting the credit and savings needs of consumers, especially those of modest means. Problematic overdraft programs include those that charge fees that aren’t reasonable and proportional, rely on systems that authorize positive and settle negative, or impose multiple representment or NSF fees.

A growing number of credit unions and banks have eliminated or greatly decreased their overdraft fees during the last few years. I recognize, however, that not all credit unions are ready to make this change. If your credit union is going to maintain an overdraft program, I encourage you to consider features like linking to savings accounts; offering affordable lines of credit or short-term, small-dollar loans; and helping your members to build savings. Additionally, as more institutions dramatically decrease overdraft fees or drop them altogether, consumers will begin to expect you to follow suit. So, it is time to rethink your overdraft program.

The good news is that credit unions and banks that have already made the switch have created new income streams. You, too, can diversify your revenue streams in creative ways. For starters, build your member base and originate more safe, fair, and affordable mortgages and other loans.

Once you make those loans, service them. And, offer other products your members need like holiday loans and other lines of credit. These are just a few ideas, and I am certain there are others.

Interest Rate Ceiling

That brings me to another point. The maximum loan interest rate ceiling for federal credit unions is another regulatory issue that has recently garnered attention.

In January, the NCUA Board extended the temporary 18-percent ceiling that has been in place since 1987, effective through September 10, 2024. Some industry stakeholders proposed raising the interest rate ceiling beyond 18 percent to as much as 21 percent. Others advocated for a floating interest rate ceiling.

However, an increased interest rate ceiling would put greater strain on the households who hold debt, such as credit card debt, and tip some family budgets into the red. If the interest rate ceiling must be raised for credit unions to underwrite consumer credit cards, perhaps credit unions should instead limit costly rewards programs and other expensive secondary benefits. Working families and young military recruits with less money and resources in these uncertain times should not be forced to subsidize elite rewards programs by paying higher interest rates.

Cybersecurity Risk

Many of you might have also heard me say that the single biggest credit union issue that keeps me up at night is cybersecurity. In today’s environment of increasingly frequent and sophisticated cyberattacks, all of us must improve our cybersecurity practices.

To that end, we implemented the new Information Security Examination procedures in 2023 for credit unions to prepare for, withstand, and recover from cybersecurity attacks. The Information Security Examination, or ISE for short, offers a measure of flexibility for credit unions of all asset sizes and complexity levels while providing examiners with standardized review steps to facilitate advanced data collection and analysis.

The ISE has three work program levels, which includes the Small Credit Union Examination Program for credit unions with less than $50 million in assets. So, for the first time, our information security examination program has been tailored to the smallest credit unions and focuses on compliance with part 748 and 749 of NCUA’s regulations.

In addition, the NCUA encourages credit unions to download and use the NCUA’s Automated Cybersecurity Evaluation Toolbox, or ACET for short. This tool is an excellent resource — especially for small credit unions or credit unions with limited resources — to understand their cybersecurity preparedness levels. The ACET is available at no cost and can be found online on the NCUA’s website.

Community Development Revolving Loan Fund

And, let me close with the NCUA’s Community Development Revolving Loan Fund, which includes grants to support digital services and cybersecurity. This year, Congress has more than doubled the funding available for grants for the Revolving Loan Fund. And, with $3.5 million available, the NCUA will be able to make more grants and bigger grants this year. The application period for the 2023 grants opened earlier this month, and I strongly encourage all eligible credit unions to apply.

We have two new grant initiatives for 2023 that will help small credit unions serve under-resourced communities and achieve their growth objectives. The first is the Impact through Innovation pilot with a maximum award of $100,000, which focuses on banking deserts, affordable housing, credit invisibles, and fintechs. And, the second new initiative is the Small Credit Union Partnership pilot with a maximum award of $50,000, that will assist small credit unions in pooling resources to realize economies of scale. Additional information on these grants and several other initiatives is available online at For interested credit unions, the 2023 NCUA grant application period ends on June 30.

Thank you again for inviting me to join you today. John, I look forward to our conversation.

Todd M. Harper Cybersecurity Consumer Compliance
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