DCBS to Issue Administrative Rule in Line with Model Credit Union Act Subcommittee Recommendation

The Oregon Department of Consumer and Business Services (DCBS) will issue a temporary rule tomorrow concerning property use and ownership for state-chartered credit unions, eliminating a specific discrepancy between state and federal regulations. The rule is one of many updates to the Oregon Credit Union Act recommended by the Northwest Credit Union Association’s (NWCUAs’) Model Credit Union Act (MCUA) Subcommittee.

The MCUA Subcommittee convened for the first time on May 31, 2012. Charged with developing policy recommendations for the Oregon Government Affairs Committee for state legislative changes to advance the credit union act and operating environment, the committee began with a comparison of the Credit Union National Association’s (CUNA’s) Model Credit Union Act and the Oregon Credit Union Act.

Over the course of two months, the committee met five times and came up with a list of suggested improvements to Oregon’s Credit Union Act that NWCUA Director of Regulatory Advocacy John Trull said “will keep the Association’s advocacy teams busy for quite a while.”

First up on the docket is tomorrow’s temporary rule, which will allow state-chartered credit unions to hold unimproved real property acquired for future expansion for six years rather than the current three.

This temporary rulemaking activity aligns Oregon rules concerning unimproved credit union property held for future expansion with comparable regulations applicable to federally chartered credit unions. Under current Oregon statutes, a credit union holding unimproved property for future expansion, such as the construction of a new branch office, must partially use the unimproved property within three years of acquisition unless the cap is waived by the DCBS director.

In contrast, recent changes to National Credit Union Administration (NCUA) regulations (12 C.F.R. § 701.36) give federally chartered credit unions six years before they must partially utilize unimproved property held for the same purpose.

The practical effect of this discrepancy between state and federal regulations is that state-chartered credit unions face a competitive disadvantage when acquiring unimproved property for new branches or support offices, especially in a commercial real estate market that favors purchasers. The temporary rule, which seeks to maintain regulatory parity in Oregon by simply aligning state and federal regulations, takes effect on Feb. 1 and will remain in effect until July 31. DCBS and the Association will form an advisory committee to facilitate permanent adoption in May.

“This demonstrates the importance of regulatory advocacy and is a clear example of the regulator taking the input of credit unions seriously and acting upon our recommendations,” said Gayle Gustafson, lending leader for Rivermark Community Credit Union and chair of the Regulatory Advisory Committee. Rivermark President and CEO Scott Burgess chaired the MCUA committee that made the recommendation.

If DCBS does not immediately adopt rules aligning state and federal regulations on unimproved property held for future expansion, state-chartered credit unions may be forced to pay higher costs for future unimproved property acquisition, which would limit expansion and could affect the credit union’s ability to operate in a safe and sound manner. These temporary rules will allow state-chartered credit unions to hold unimproved property for longer, potentially driving down acquisition costs and affording them ability to provide more services in a cost-effective manner.

“I have been very impressed with David Tatman, Janet Powell and Richard Blackwell, among others at the Department of Consumer and Business Services, and with their willingness to expedite this administrative rule and keep us abreast of the mechanics of the rulemaking process,” Trull said.

 

The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions on these or any regulatory issues, please contact Director of Regulatory Advocacy John Trull at jtrull@nwcua.org, or at 503.350.2209.

Posted in Advocacy News, Compliance, Compliance News, Federal.