League Monitoring NCUA Board's Consideration This Week of 'Financial Innovation' Rule

The National Credit Union Administration Board will tomorrow consider its financial innovation rule, which is designed to make fintech partnerships easier for federally insured credit unions.

“We appreciate the NCUA Board’s commitment to providing regulatory clarity and addressing marketplace changes brought about by technology or evolving market opportunities,” said League President/CEO Carrie Hunt. “It’s important the industry continues to work with NCUA to identify opportunities to update regulations such as this. It’s why the League considers participation and engagement during the regulatory review process so important.”

Of interest to many credit unions is a measure in the rule that would narrow the scope of eligible obligations that is subject to a cap of 5% of a credit union’s unimpaired capital and surplus. Under the current rules, credit unions could quickly find themselves hitting this cap in buying loans classified as eligible obligations. The proposed rule would remove several loan types from that “eligible obligations” category, meaning the 5% cap would only apply to notes purchased from a liquidating credit union.

The measure also looks to address a regulatory headache some credit unions faced when examiners questioned whether previous NCUA guidance on indirect loans applied to certain fintech partnerships. The final rule seeks to provide clarity on this and other points of confusion.