NCUA Chairman Todd M. Harper during a meeting of the NCUA Board.
As Prepared for Delivery on October 24, 2024
Thank you, Martha and Leilani, for your briefing on new charters and field-of-membership expansions. And, thank you to the entire team in the Office of Credit Union Resources and Expansion, or CURE for short, for your continued work to support the growth and development of credit unions of all sizes, but especially the efforts of small credit unions, low-income credit unions, minority depository institutions, and those credit unions that seek to deepen access to safe, fair, and affordable products and services in under-resourced communities.
CURE’s work in supporting the chartering of new credit unions and any credit union seeking charter changes, bylaw amendments, field-of-membership expansions, and low-income designations is vital to a healthy and diverse financial system. And, CURE’s work delivering online training and resources and providing grants and loans through the Community Development Revolving Loan Fund enables credit unions to better serve their members’ and communities’ financial needs. In short, CURE’s work aims to create a financial system that works for all — a philosophy that underlies the purpose of the credit union movement.
As noted earlier, the agency has approved three new federal charters thus far in 2024 in addition to providing share insurance to one new state charter. There are also three new federal charter applications under review. Three or four new charters per year may not sound like a lot, but it represents positive momentum and aligns with historic trends.
Undoubtedly, the emergence of non-depository financial institutions and fintechs, as well as the pressure to achieve economies of scale, are contributing to the low number of organizing groups seeking to charter a new credit union. And, while the NCUA can’t alter this economic reality, we are making strides in the areas we can change — namely assisting prospective credit union organizing groups with gaining the required capital as well as streamlining and reducing the length of the chartering process.
The NCUA’s provisional charter pilot program allows organizing groups to show they have the capacity to start a credit union which, in turn, could facilitate their efforts to raise needed capital. As noted earlier, the NCUA has already approved two provisional charters, and another is in phase II of the application process.
Decreasing the average number of days from receipt of a complete application to an approved charter certainly modernizes, facilitates, and streamlines the chartering process. A contributing factor to the overall reduction in the review process includes CURE’s automated management system for chartering. And, although the average number of days is up in 2024, the time needed to complete the process today is well below the average for between 2018 and 2020.
By facilitating the process through which credit union organizers can access the initial capital needed for capital standards, loss reserves, and operating expenses — and streamlining and automating the application process as appropriate — the NCUA is making it easier and supporting promising organizing groups to form a credit union.
Obtaining a charter is not supposed to be easy or simplistic. With a charter comes the responsibility to promote the financial well-being of members in a safe, sound, and consumer-friendly manner. This delicate balance requires us to be both purposeful and careful. Within statutory, safety-and-soundness, and consumer protection guardrails, the NCUA is committed to working with promising organizing groups to get to ‘yes’ whenever possible.
Thanks to the work of the CURE team — as well as the Vice Chairman’s steady focus on this priority — the NCUA has made meaningful strides during the past four years in facilitating the chartering process so that organizers can pursue their visions of people helping people. Welcoming a new credit union into the system of cooperative credit is good not only for the system but also for the consumer, many of whom have been unbanked and underserved for far too long. And, the NCUA’s mission, in part, is to protect the system of cooperative credit and its member-owners through effective chartering and supervision.
Before closing, I do have a few questions for the team.
As shown on slide 14, the number of underserved area applications has risen considerably since 2020. What is behind this uptick in numbers?
For those credit unions with approved underserved expansion applications, I understand that not all credit unions have opened the requisite branches in those areas within 24 months, as required by law. How is CURE handling those deficiencies?
Martha, my next set of questions focus on process. Slide 5 shows that in 2024 we chartered one federal credit union and issued two provisional charters for a total of three new credit unions. What more can be done to shorten the application-to-charter process? Also, what is the most significant challenge or obstacle to obtaining a charter?
Thank you, Martha, for noting the complexity involved in this process and the challenges you and your team are working through. It’s important that stakeholders understand the scope of these challenges. I know that my father did just that when he worked to organize a teachers’ credit union in 1967, and his father did the same in establishing a soap factory credit union in the 1930s. But, that was then and this is now.
So, my next question is why are the applications becoming more complex?
What are the main reasons behind charter deferrals?
And finally, how well are new credit unions performing?
Thank you for those insights.
In closing, the chartering of a new credit union is often the culmination of years of high hopes and hard work by organizers. Consistent with the law, we at the NCUA need to facilitate that work. That’s why the NCUA is making meaningful improvements to its chartering process, where possible, to bring new and more federal credit unions into the system. In doing so, we are providing consumers with greater access to safe, fair, and affordable financial services under the cooperative model.
Thank you again, Martha and Leilani. That concludes my remarks. I now recognize Vice Chairman Hauptman.