The US House Committee on Financial Services has passed a bill to require regulators to examine the challenges faced by groups wishing to create new credit unions.
Introduced by Rep. Jake Auchincloss (D-Mass.), the Promoting New and Diverse Depository Institutions Act is supported by the Credit Union National Association (CUNA) and the National Association of Federally-Insured Credit Unions (NAFCU).
The bill would require the National Credit Union Administration and other prudential regulators to conduct an 18-month study examining challenges prospective new depository institutions face, including new credit unions. The regulators would also be tasked with devising a plan to encourage new financial institutions while promoting safety and soundness.
“A challenge credit unions face in serving underserved and unbanked communities is the high regulatory burden to create new or de novo credit unions” reads the letter by CUNA’s CEO, Jim Nussle. “Prior to the Great Recession, an average of 7.7 de novo credit unions were created each year. However, in the years after, and in the wake of the implementation of Dodd-Frank, that average decreased to the creation of just 2.2 de novo credit unions per year.”
CUNA further explains that “chartering a credit union is a time-consuming and complex endeavour”, which includes “identifying capital sources, determining field of membership, developing a business plan, appointing a board of directors”.
The apex adds that while NCUA offers consulting services at no cost once a preliminary field of membership is approved, receiving a charter can still take more than three years.