WASHINGTON–Former NCUA Board Member Todd Harper, who along with fellow board member and Democrat Tanya Otsuka was fired by the White House in mid-April, has used two public appearances this week to share some strong views on credit unions, the lawsuit he and Otsuka have filed against the White House over the firings, on whether some CUs are really living the philosophy of people helping people, to share the story of how he came to learn he was fired, and much more.
In response to some of what Harper had to say, both America’s Credit Unions and the Defense Credit Union Council shared their views, as reported below.
In remarks to the Inclusiv annual conference in Cleveland and the Brookings Institution in Washington, Harper touched on themes he has addressed in the past, but did so in stronger terms than he has when constrained by his role on the board.
As the CU Daily reported here, Harper and Otsuka are challenging their firings by the Trump White House in a complaint filed by Vincent Levy of Holwell Shuster & Goldberg LLP, New York, in the United States District Court for the District of Columbia. The plaintiffs are alleging that neither was provided any reasons for the termination nor did the one-sentence emails informing them of the dismissal “attempt to assert a basis for cause. Nor could they.”
The suit alleges both Harper and Otsuka are entitled under the Federal Credit Union Act to serve their “remainders of their terms as Members of the National Credit Union Administration Board” as board members serve six-year terms and “may only be removed for cause.”
‘Important Policy Questions’
Harper said a hearing in the case has been scheduled for next week and then he and Otsuka will have until May 12 to respond. That’s just 10 days ahead of the board meeting the agency currently has scheduled, even though Chairman Kyle Hauptman is the only member of the board. NCUA has said a one-person board is sufficient for a quorum.
Harper believes both he and Otsuka should be restored to the board in time for that May 22 meeting due to the gravity of one of the issues on the agenda, which is the DOGE-led effort to reduce staff by 20%.
“There are important policy questions to discuss, even though these are briefings,” said Harper. “How are we going to restructure NCUA? What should be the normal operating level be set at for the share insurance fund. After all, if you have fewer examiners and fewer people there are going to be fewer exams, there is going to be greater risk and we should have a higher NOL level.”
Here is a look at some of what Harper shared in his comments at the Brookings Institution.
On the Decision to File Suit
“Suing the president of the United States is not an easy choice,” Harper said.
While there is financial pressure from no longer be employed, Harper said he and Otsuka are being represented on a pro bono basis.
“In many ways it was more difficult than coming out of the closet, and I say that because when you come out of the closet you think about it for years, you have this internal debate about what’s it going to mean for my career, what’s this going to mean for my lifestyle? Am I going to be threatened,” Harper said. “You have a lot of time to think about that. Here, we had a week to think about it and whether to bring the case.”
Harper said he believe that should the three-member board not be restored it does not bode well for the future of financial regulation.
On Finding Out He Was Terminated
Harper said he was with his partner, who was in the hospital, when he was fired by the White House. But he was unaware of it until Otsuka called him at 7:30 at night on April 15 and asked him if he had checked his email, sharing that she had received a ”Thank you for your service” email from the White House informing her of the firing.
Harper said he checked both his NCUA email account and personal account and found no message.
That same night Harper was scheduled for a sleep study at the hospital and he did not return home until the morning, when he discovered his work phone and work computer no longer worked. He finally found out from another person about the White House move.
“They had sent (the email) to the wrong email address at the NCUA. It is the first time ever an NCUA board member has been removed within their term,” Harper said. “It’s unlawful and unprecedented.”
About the Boards at Independent Agencies
Firing board members, Harper said, “chips away at the notion that we should have regulatory experts who are there over a period of time, who build up knowledge with respect to how the agency is run and the policies that they are rolling on a regular basis, if you will, on and off the board every six years,” said Harper. “It chips away at this whole notion that Congress set up the independence of the agencies. (The firings) also mean, quite frankly, greater risks for big policy swings and it undermines what is the whole concept of a board.”
Harper said Congress has shown clear intent it does not want the president to interfere with board terms. “We don’t want politics to come into play.”
On Disclosing Overdraft Income
While Harper was chairman he oversaw a policy change that required credit unions of more than $1 billion to release and disclose overdraft and NSF income. That data was released once before new Chairman Kyle Hauptman reversed the disclosure policy.
The Brookings Institution discussion was moderated by Aaron Klein, the Miriam K. Carliner Chair and senior fellow in Economic Studies at the Institution. Klein told Harper he is worried about the future of credit union oversight, and further noted the data revealed some CUs would be unprofitable were it not for NSF/OD income.
“One of the first thing that switched with the new chairman was you hide the data? That strikes me as that’s how you get in trouble, when you begin hiding the data,” said Klein.
Harper responded by saying he believes “sunshine is good for you.”
“Credit unions are owned by their members; they should be doing right by their members,” said Harper. “What we do know is that overdraft fees often fall on the underserved, the very people who credit unions under the statute are supposed to be working to help, people of modest means. Of the 44 billion-dollar-plus credit unions, 43 charged no NSF fees, 23 charged no overdraft fees, and 10 of those charge no overdraft and NSF fees. I think those are you know some very interesting numbers. You see that certainly close to 400 are charging some type of those fees together were more than about $4 billion (in revenue).”
While credit unions comprise about 10% of banking assets, CUs collected 47% of overdraft and NSF fees.
“It’s a huge problem for credit unions who should be serving people of modest means and it undermines their position that they are people helping people,” Harper said, suggesting such CUs have gotten “lazy.” “What are credit unions supposed to be doing? They are supposed to be making loans, [but] it’s easier to make a fee than it is to make a loan.”
On the Risk to the Credit Union Tax Exemption
As the CU Daily has been regularly reporting, credit unions are deeply concerned in Washington the CU tax exemption will be revoked in the current Congress as it seeks ways to offset the extension of the Trump tax cuts.
“Credit unions are in the most perilous place they’ve been on the taxation issue in the 25…years I’ve worked on credit union policy issues,” Harper said.
On Response to Their Lawsuit Against the White House
“The fact that America’s Credit Unions is not coming out loudly and speaking in favor of Tanya and I being restored to the NCUA board is also weakening the ACU’s position amongst Democrats,” Harper told the Brookings Institution, adding he believes the trade group has taken a “wait and see what happens” approach.
He also suggested America’s Credit Unions is “getting what they want” under a Republican-led agency that is rolling back regulations. (America’s Credit Unions has responded, as outlined below.)
On Credit Unions & Sports Sponsorships
As the CU Daily has also reported, credit unions around the country have signed on to increasingly large sports sponsorships, including Northwest FCU’s naming rights deal with the home stadium of the NFL’s Washington Commanders.
Harper believes the critics have a point.
“What is the return on average assets for [such] a large marketing fee?” Harper asked. “Who gets those box seats? I bet you they are typically not the members. I bet you they are typically more the executives of the companies and their families.”
Harper said that while he was at NCUA he had asked agency staff to investigate reports that mortgage brokers were given perks at stadiums where CUs had sponsorship deals, which he said is a potential violation of anti-kickback laws that apply to the real estate industry.
Harper said he believes that instead of spending money on such deals CUs should instead pay higher interest on savings or lower mortgage rates.
On Mergers
“I used to say that it was a small number, but I can no longer deny that they are (increasingly) happening,” he said.
As for the reasons cited for those mergers, Harper asked, “How big of economies of scale do you really need?”
On Credit Union Health
Harper said there are nine credit unions of more than $500 million in assets that are currently carrying CAMELS ratings of 4 or 5.
Harper’s hour-long remarks to the Brookings Institution can be found here.
America’s Credit Unions Responds
In response to Harper’s comments, Jim Nussle, president and CEO of America’s Credit Unions, issued a statement saying, “America’s Credit Unions has always supported an independent, bipartisan NCUA Board to serve as a strong regulator for the credit union industry. That has not changed with the removals of Board Members Todd Harper and Tanya Otsuka, and we have asked the Trump Administration to nominate individuals to fill those vacancies.
“At the same time, we are monitoring the litigation filed by Mr. Harper and Ms. Otsuka as we are all the legal issues surrounding the current board composition. We look forward to a strong, stable NCUA Board as these issues get resolved by our executive and judicial branches of government.
“The credit union industry remains firmly committed to its mission of ‘people helping people.’ While some are trying to drive a wedge between large and small credit unions, it is not asset size, nor how credit unions spend their marketing dollars, nor the size of their field of membership that defines a credit union.
“Credit unions serve more than 142 million Americans—military members and their families, teachers, farmers, first responders, small business owners, Main Street America. They cure banking deserts when banks abandon communities. They ensure all Americans have access to safe and affordable financial products and services. Credit unions of all sizes ensure the safety and soundness and strength of the industry.”
The Defense Credit Union Council Responds
“Credit unions are always evolving and as they grow they are able to do more things such as serving more communities, making the proper investments in technology, and keeping affordable loan rates across the board. All while never losing focus on their original mission,” said DCUC President and CEO Tony Hernandez in a statement. “Now is the time for unity–more addition, not subtraction. In other words, large plus small credit unions, state plus federal charters, metropolitan plus rural areas. Let’s win this together.”