LAS VEGAS—Former NCUA Chairman Dennis Dollar has offered his forecast for what’s ahead in the regulatory and legislative landscape for credit unions, what’s likely ahead at NCUA, how many CUs there will be in 2030, and the odds of CUs losing their tax exemption and of NCUA being rolled up into the Treasury department.

In remarks to the NACUSO Reimagine Conference, Dollar noted that in 2002 he had predicted that by 2030 there would be more CUSOs than credit unions. “I still stand by that,” he said, going on to discuss some of the reasons driving consolidation.

In the meantime, Dollar, a former Mississippi legislator and credit union CEO who formed a consultancy after leaving NCUA, shared a chart of year-end 2023 credit union performance across numerous metrics and asset size categories and highlighted some of the numbers that jumped out at him. 

What’s Clear

What is clear, he pointed out, is that scale matters, with the largest credit unions being the highest performing, and all CUs below $500 million in assets reporting a decline in assets and members during 2023. But there is also a caveat: Credit unions of more than $10 billion in assets had lower ROA than CUs between $1 billion and $10 billion in assets. The reason: additional regulations.

“If you ever want to look at the cost of regulation, look at the difference between credit unions of $1 billion -$10 billion and those with assets greater than $10 billion. Just the Durbin Amendment alone is a killer on interchange,” Dollar said. “Last year was a good year in credit union land. You cannot allow anything to stand in the way of your willingness to fight for well-managed growth at your credit union. Not indiscriminate growth. Not growth for the sake of growth.”

A Dilemma

Looking to smaller CUs, Dollar said many face a dilemma, often of their own doing. 

“One of the reasons smaller credit unions are sitting on more capital is they are afraid to invest in growth. They are keeping it, hoarding it, for when the examiner comes in. That comes down to allowing the examiner to make business decisions for you,” Dollar said. “But that refusal to invest capital is why assets and membership growth are both shrinking.”

Dollar also shared a chart showing the share of market held by the 100 largest banks, smaller banks and credit unions. He noted that in 1992, credit unions had just over 5% of the market, which had grown by year-end 2023 to 8.5%. But the top 100 largest banks had grown to 74.5% of the market.

“The real hemorrhaging by community banks isn’t to tax-exempt credit unions; it’s gone to their big bank brethren,” Dollar said. “That means credit unions are going to have to get it from the big banks. We’ve got to use scale to compete, but we still have to use the advantage of being smaller to be able to be more nimble.”

Politics & Regulation

Meanwhile, Dollar noted the Trump administration’s regulatory agenda is going to be much less activist. Still, the margins in the House and Senate are thin, so there’s a “lot of give and take.”

He predicted the NCUA board, with its Republican Chairman Kyle Hauptman and its two Democrat board members, Todd Harper and Tonya Otsuka, will engage in more compromise than other regulatory agencies. He expects NCUA rulemaking will slow.

In August, noted Dollar, Hauptman’s term will expire and a new NCUA chair will be appointed. 

“That new chairman is going to be the one who carries forward the Trump agenda, but he’ll still have two Democrats on that board,” said Dollar. “It’s going to be interesting to see if board member Harper and board member Otsuka are going to be able to override the chairman, or if Hauptman can get a second vote, or whether we are going to see something we need to see more of in Congress—compromise.”

Without it, added Dollar, there will be “gridlock” on the NCUA board.

A ‘Telltale Sign’

The “telltale rule to watch” at NCUA, according to Dollar, will be the Succession Planning Rule finalized in December of 2024. Then Chairman Harper pushed through the rule, which Hauptman voted against, Dollar reminded.

“It sounds innocuous, but it gets dangerously close to NCUA telling a board of directors who to hire as the next CEO. It’s a small step from how you hire your CEO to what you pay your CEO and what kind of benefits are in place,” said Dollar.

The Succession Plan Rule is scheduled to go into effect in January of 2026. 

In 2027, Dollar also reminded Harper’s seat comes up, and Trump will appoint a second Republican to the board.

Credit Unions & the Supreme Court

Dollar also touched on the Supreme Court decision in Chevron in which it repealed the deference courts have long given to regulatory agencies. The standard now is that the agency must prove that any action was “reasonable” according to the law under which it was established. That means for every regulation any agency might implement it must consider whether there is going to be a lawsuit and whether the decision can be justified, Dollar said.

“That is going to be a bigger change in regulation than anything the Trump Administration might do. It’s a Supreme Court decision,” he told the meeting.

When it comes to the fate of two issues of significant importance to credit unions, Dollar believes the odds of credit unions losing the tax exemption are 30-70. The odds of NCUA being consolidated into other regulators are 50/50, he said.

A ‘Gamechanger’

“It’s always good politics to say we’re looking to consolidate agencies. The problem for credit unions is if NCUA were to be rolled up into the Treasury, when was the last time a Treasury secretary came from credit unions? Never. When was the last time a Treasury secretary came from banks? There have been several dozen,” Dollar said. “The end result would be the bankers would be making decisions for credit unions. It is a potential game-changer.”

Dollar noted, however, Treasury Secretary Scott Bessent has indicated he does not support the roll-up of the agencies.