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NAFCU witness Linda McFadden, president and CEO of XCEL Federal Credit Union in Bloomfield, N.J., told the Senate Banking Committee yesterday that "enough is enough" in response to the continuing overregulation of the credit union industry.

Tuesday's Senate Banking Committee hearing, "Examining the State of Small Depository Institutions," began yesterday with a panel of federal regulator agency witnesses, including NCUA Office of Examination and Insurance Director Larry Fazio and representatives from FDIC, the Federal Reserve and others. McFadden testified alongside other witnesses from the credit union and banking industries.

NCUA's risk-based capital proposal

Indicating the committee's concern about the risk-based capital proposal, the first question from Chairman Tim Johnson, D-S.D., was directed at NCUA's Fazio on the proposed rule. Fazio discussed the potential for a second comment period.

Fazio said he couldn't give specific comments on the timing of the final rule or whether a second comment period will be required. He said NCUA is still reviewing the more than 2,000 comment letters it received from the industry and the concerns heard during the three listening sessions this summer. Fazio said once this work is completed, the NCUA Board will decide the direction of the rule and whether to open it up for a second comment period. NAFCU will continue to push for a second comment period.

McFadden said the risk-based capital proposal was "off the wall" and that the entire credit union community was stirred up by it. She said NCUA needs to re-propose the rule.

McFadden, noting Matz's predetermination that there wouldn't be a second comment period (comments she made at a listening session this summer in Alexandria, Va.), said the current environment is not a collaborative one.

NCUA Office of Examination and Insurance Director Larry Fazio testified Tuesday during a Senate Banking Committee hearing.(Cedeno photo)

Sen. Jack Reed, D-R.I., asked Fazio about S. 968, the "Small Business Lending Enhancement Act," which would raise the arbitrary credit union member business lending cap to 27.5 percent for eligible credit unions. Fazio said through the regulatory and exam process, the agency could handle implementation of the bill for credit unions that are willing and able to participate. He noted NCUA's support for the bill.

When responding to a question by Sen. Jerry Moran, R-Kan., about the process of receiving an MBL waiver from NCUA, McFadden said the process is so complicated and long that the loan opportunity is often lost.

Sen. Mark Warner, D-Va., discussed his bill, S.2698, the "Regulatory Easement for Lending Institutions that Enable a Vibrant Economy (RELIEVE) Act," which would provide federal deposit and share insurance parity for credit unions with regard to IOLTAs and other escrow accounts. Warner reiterated the importance of IOLTA parity for credit unions with the committee and witnesses.

Reed asked Fazio about third-party vendor authority, which Fazio mentioned in his opening statement. He noted significant safety and soundness issues at individual credit unions and "systemic" concerns as some vendors are used widely within the industry.

Moran asked McFadden her views on third-party vendor authority. She told Moran that credit union service organizations are all supported by credit unions and that NCUA already has the authority it needs over CUSOs through the regular exam process. She said further authority would be an "overreach" and "unnecessary." NAFCU agrees.