A group of credit unions is fighting back against an NCUA rule that will prevent credit unions from receiving the full benefits of a program Congress designed to help banks and credit unions serve more minorities.
One credit union CEO, who was a speaker at a forum Tuesday for community development credit unions, said credit unions are willing to sue the NCUA over the rule.
Ninety credit unions have applied for $3.1 billion from a $9 billion pool called the Emergency Capital Investment Program. Congress created ECIP in December 2020 to encourage low- and moderate-income community financial institutions to augment their efforts to support small businesses and consumers in their communities. The ECIP program is limited to Community Development Financial Institutions and Minority Depository Institutions.
While the FDIC allows banks to borrow for 30 years or more, a new NCUA rule prevents credit unions from secondary capital borrowing for terms greater than 20 years. Yet the U.S. Treasury Department, which administers the program, offers funds for 15- or 30-year terms.
In a virtual “Town Hall” sponsored by Inclusiv, a group representing more than 400 CDFI or MDI credit unions, CEOs blasted the NCUA for a rule they argued violated congressional intent, had no basis in statute, and effectively reduced the help credit unions could provide to Blacks, Hispanics, and other minorities.
Martin Eakes, president/CEO of Self-Help Federal Credit Union in Durham, N.C. ($1.7 billion in assets, 89,525 members), said credit unions are willing to take the NCUA to court to stop it from implementing a rule that is “taking away 50% of the value” of the Treasury program.
In an Oct. 1 letter to the NCUA, Inclusiv President Cathie Mahon wrote that credit unions also had no limits until December 2020 when the board included secondary capital into the wording of a provision addressing issues about subordinated debt.
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