By Jason Stverak

The recent firing of National Credit Union Administration (NCUA) board members Todd Harper and Tanya Otsuka has set off alarm bells in the credit union community. While the circumstances of their removal are troubling, this issue goes far beyond any individual personalities. 

At stake is the strength and independence of the NCUA itself – a cornerstone of stability for over 140 million credit union members and the $2+ trillion credit union industry nationwide. We urge lawmakers and the public to remember why a strong, independent NCUA is essential for safeguarding credit unions and their members’ deposits, and to resist any effort to merge or diminish this vital regulator.

Credit Unions Are Not Banks – and NCUA Recognizes That

Credit unions occupy a unique role in our financial system as member-owned, not-for-profit cooperatives. They exist to serve their members (everyday consumers, including many of modest means), rather than to maximize profits for stockholders. This mission demands a regulator that understands and upholds the distinct nature of credit unions. 

The NCUA – an independent federal agency created by Congress – was designed to do exactly that. Its independence “is crucial in recognizing and upholding this distinction,” providing tailored oversight under a cooperative model instead of a one-size-fits-all bank regime. In other words, credit unions are not banks, and the NCUA has long ensured they aren’t regulated like banks.

The Risk of Consolidation

If the NCUA were folded into a larger bank regulator or otherwise weakened, credit unions would be forced into a “one-size-fits-all” regulatory model ill-suited to their mission. Rules crafted for big profit-driven banks would inevitably trickle down to these community-focused institutions. The result?  Higher compliance costs, reduced ability to offer affordable loans and low fees, and an erosion of the community-based, member-first services that credit unions have provided for decades.

We cannot allow an “efficiency” push to sacrifice the special role that credit unions play for millions of Americans.

Safeguarding Deposits: The NCUSIF and System Stability

Beyond oversight, the NCUA’s most critical responsibility is protecting members’ deposits through the National Credit Union Share Insurance Fund (NCUSIF). The NCUA has a proven track record as a guardian of financial stability, managing the NCUSIF prudently and shielding credit union members from loss. 

Notably, during the 2008 financial crisis, banks required massive taxpayer bailouts, but credit unions weathered the storm with far less disruption thanks to NCUA’s sound oversight. The agency’s management of the NCUSIF provided a stable backstop for deposits, reinforcing public trust in credit unions. Likewise, in more recent crises, the NCUA has acted quickly to stabilize troubled institutions without resorting to taxpayer funds.

This track record stands in stark contrast to what could happen if the NCUA’s role or insurance fund were merged away. Merging the NCUSIF with the banks’ Deposit Insurance Fund (DIF), as some have vaguely suggested in the name of consolidation, would spell trouble. It would effectively make credit unions subsidize the riskier lending practices of commercial banks, forcing cautious credit unions to pay for losses they didn’t create. Over time, credit union members would bear the cost – through higher fees or lower dividends – of bailing out bank failures. 

Even worse, in a combined fund, a future crisis could see credit union failures being deprioritized next to giant bank collapses. The NCUSIF was “cooperatively designed” for credit unions’ specific risk profile and funding structure. It should remain separate to ensure that credit union deposits are protected based on the financial health of credit unions themselves, not the fortunes of Wall Street banks.

Protecting Communities, Competition, and Consumers

A strong, independent NCUA isn’t just about industry mechanics – it’s about financial inclusion and consumer protection. Credit unions have long been champions of reaching the underserved: low-income neighborhoods, rural areas, communities of color, the military and veteran community, and others often overlooked by big banks. They offer an accessible alternative for consumers, with generally lower fees, fair rates, and a mission-oriented, people-helping-people ethos. 

This adds healthy competition and choice in our financial marketplace. An independent regulator like the NCUA has a mission aligned with these goals, fostering the growth of credit unions that prioritize financial equity for their members.

Being Watered Down

If the NCUA were diminished or absorbed by another agency, those consumer-focused priorities could easily get watered down. Credit unions would lose their dedicated voice in Washington – the advocate that understands their model and fights for rules that let them serve members first. In a consolidated regulatory framework dominated by large bank interests, credit unions’ concerns might be sidelined, and policies would skew toward the biggest players. 

Over time, credit unions could be forced to conform to profit-driven norms at the expense of consumer-friendly practices. That means fewer choices and higher costs for everyday consumers, especially those relying on credit unions for fair access to financial services. Preserving NCUA’s independent oversight helps ensure that credit unions can continue to thrive and fulfill their special public-interest mission – to the benefit of consumers and communities nationwide.

The Need to Preserve NCUA’s Independence

The founders of the modern credit union system understood the importance of an independent regulator. Congress structured the NCUA Board as a bipartisan, three-member panel with staggered terms precisely to insulate it from political whiplash and ensure continuity in safeguarding members’ interests. 

Unfortunately, proposals to consolidate or eliminate the NCUA are not just theoretical. Calls to merge the agency into a new Treasury bureau and fold the credit union insurance fund into the FDIC have already surfaced under the banner of “government efficiency.”

We’ve seen this movie before. In the 1980s, the savings and loan (thrift) industry suffered a crisis, and its dedicated regulator (the OTS) and insurance fund (the FSLIC) were dismantled and absorbed by banking agencies. Today, the once-thriving thrift industry has effectively vanished as an independent system – its remaining institutions are scattered under various regulators, its unique identity wiped out. 

Reason for Pause

That historical lesson should give us pause eliminating an independent regulator can irreversibly transform (or even extinguish) a financial sector. We must not let short-sighted ideas of reorganization do the same to credit unions, which have so far avoided such calamity through prudent oversight and a cooperative, self-funded insurance model.

NCUA’s independence must be zealously guarded. This agency’s autonomous status allows it to make unbiased, safety-and-soundness decisions without undue political pressure. Its funding comes from credit unions and their members, not from taxpayers, which reinforces that it works solely in the members’ best interest – and it should stay that way. 

Far from needing dismantlement, the NCUA should be strengthened and its mission reaffirmed. Lawmakers ought to reject any attempt to fold the NCUA into another regulator or to weaken its authority. Doing so would be penny-wise and pound-foolish – any superficial bureaucratic “streamlining” would come at the exorbitant cost of financial stability, consumer protection, and faith in the credit union system.

‘Indispensable’ to Credit Unions

In sum, an independent NCUA is indispensable to a thriving credit union movement and a fair financial system. It ensures that credit unions – from the smallest community development credit union to the largest federal credit union – remain safe places for families to save and borrow, guided by a mission of service rather than profit. 

Undermining this regulator would be a grave mistake that could upend credit union stability and limit financial access for millions. Instead, we should reinforce the safeguards and lessons that have served us well: keep the credit union regulator independent, well-governed, and focused on its vital mandate. 

Congress created the NCUA as a strong, separate watchdog for a reason. Now, Congress and the administration must stand up and protect the NCUA’s independence – and by doing so, protect the future of credit unions and the consumers who rely on them.

Jason Stverak is chief advocacy officer with the Defense Credit Union Council. For info: www.dcuc.org.