NCUA Vice Chairman Kyle S. Hauptman delivers remarks at the 2024 ACU Congressional Caucus in Washington, D.C.
As Prepared for Delivery on September 9, 2024
Good morning and thank you. This conference is one of my favorites. One reason I’m here is to get ideas on how I should focus the remaining days I have left in this job. Around this time next year, the White House will likely announce a new Board Member. That’s because my term on the NCUA Board ends next August, so I have less than a year left. Whew, I was worried that would be an applause line.
That’s part of my message today: that what ACU does matters, that your advocacy matters. Here’s an example of a small, yet useful improvement that was entirely because of people in this hotel today; we’re revising our records retention policies, so you don’t feel compelled to keep records from decades ago. It all started with a call I had with CUNA’s Small Credit Union Committee. They mentioned credit unions that had boxes from 40 years ago because they were concerned the NCUA might someday ask for something from back then, all because the NCUA had never put any kind of limit on how many years of information we can require. I saw photos of storage units, piled high with clearly ancient papers, printed on that old dot-matrix paper. Remember those with the perforated sides with little holes? I had to look it up, that’s called ‘continuous feed’ paper. So, in April we put out an Advanced Notice of Proposed Rulemaking, and help is on the way.
Again, all because I was in a meeting with folks like you. I’m very aware that the only people who think compliance is easy are those that don’t have to do it. Other agencies normally do have a limit on records retention, like the SEC requires records from the last seven years. The IRS only audits tax returns in the past three years after the return is filed. So, the upshot here is that you’re off the hook on your 2019 taxes.
But seriously, your advocacy created real tangible results, that’s the message. Those storage units of old records may have continued being piled full of boxes for years to come, but instead someone brought the situation to our attention. It wasn’t controversial either, all three Board Members immediately agreed on what to do. We just needed someone like you to send a photo, to tell us what is actually happening.
And in America, you deserve protection from an overbearing government. The same reason there’s a statute of limitations for being prosecuted. So, if we at the NCUA find ourselves wanting records from 1994 that’s our problem, not yours, because government should have to face deadlines and accountability as well. And speaking of protecting us from government: regarding what are labeled as junk fees, I’ve never seen a credit card late fee or an overdraft fee that comes anywhere close to what governments themselves charge.
Now, I want to address an issue that has been a topic of much discussion recently: the potential impact of limiting non-sufficient funds (NSF) and overdraft fees. I was, and am, opposed to the NCUA’s new policy of forcing credit unions larger than $1 billion to publicly state their revenue from those sources. If NCUA or other agencies ‘get over their skis’ and interfere in the private financial affairs of credit unions and their members, the resulting credit union use of NSF and overdraft services could have the paradoxical effect of limiting access to financial services for those who need it most.
Most importantly, America’s more than140 million credit union members know their lives better than we do. And removing overdraft often results in the consumer paying much higher fees and treated much worse. The ultimate irony here is that governments always charge the highest fees. Governments often have coercive powers far beyond any financial institution. Late child support payments mean no shared custody of children. Cars with a boot because of late parking tickets come with late fees that exceed any bank or credit union in this country. People have had my experience, of trying to get to work and their car is either towed because of late registration fees or booted due to unpaid tickets. Some of those people thus committed parole violations because they were late to work. This stuff is often avoided via overdraft fees. Paying a $30 overdraft fee is better than the $1,200 fee for filing taxes late.
For many credit union members, overdraft protection and the ability to occasionally rely on NSF services are not just conveniences — they are essential tools that help them manage their finances. Eliminating these options could drive some members away from credit unions and towards less regulated, higher-cost financial service providers. In essence, by restricting these services, we may inadvertently push consumers into riskier and more expensive financial arrangements, reducing financial inclusion rather than enhancing it.
It's crucial that we strike a balance. Our regulatory framework should protect consumers from predatory practices without depriving them of the financial tools they need to navigate their lives. You can tell it’s an issue I’m passionate about, and I appreciate your attention. But the consequences of well-intentioned government are too painful to ignore. And the victims of overbearing government are rarely the elites, but rather the ‘people of modest means’ that credit unions are supposed to serve.
There is a well-intentioned movement aimed at protecting consumers from excessive fees, which is something we all support. I’ve paid those fees myself. It’s not fun. However, we must also consider the unintended consequences of such regulations. I think we all get the point here: paying fees isn’t fun, but for millions of people it’s the better option.
Make no mistake: I personally don’t want to pay nor charge anyone overdraft or NSF fees. And there are ways to reduce the number of situations that result in those fees. Faster, real-time 24/7 payments would help a lot; this exists all over the world but not in the U.S. Financial literacy and savings programs can also help reduce the sting of overdraft fees. I’m not on the side of anyone charging stiff overdraft fees. I’m saying we need to be aware of what happens when NCUA or CFPB interferes in people’s private lives. We know there are beneficiaries of these misguided policies; the policies wouldn’t exist if no one benefited. But who benefits from government attempts at price controls?
And finally, before we get to Q&A, I want to mention two fascinating new technologies that we often hear about: Artificial intelligence, and blockchain and digital assets, which includes cryptocurrency. I’ve made clear that the NCUA shouldn’t be a technophobic agency. We at the NCUA are already exploring ways to use AI for fraud detection, discussion boards for examiners, and ultimately an external-facing customer service chat for credit unions. We already use AI to scan Call Reports.
As for digital assets, stablecoins are already changing America’s creaky payments system, especially for international payments, as well as providing loan opportunities with the easiest-to-foreclose-on collateral you can imagine. My main point here is that credit unions have always evolved with new technology; they were early users of ATMs and then the internet and mobile banking. It’s important that we at the NCUA understand that innovation is necessary. I had a reporter ask me, “Aren’t you nervous about being pro-AI and pro-crypto, and do you worry about the problems they may cause?” I replied, “Do I worry there might be problems, be downsides? I know there will be.”
Every new, widespread technology comes with downsides. Did you know that there zero car crashes before we had cars? Yet, none of us arrived here on a horse. For that matter, I’ve been asked about crypto’s reputation in some circles as being used by criminals. Well, if you think crypto is often used for illicit purposes, you’re going to freak out when you hear about cash.
That is to say, my true north is making sure credit unions don’t go the way of Blockbuster video because their regulator wouldn’t let them compete. Thank you for having me.