Who Regulates Lending by Credit Unions

Credit Unions are not-for-profit organizations that do many of the same things as banks and are owned by members. Who regulates the particular credit union’s lending depends on the credit union’s charter. Credit unions generally offer their membership home loans, auto loans, credit cards, personal loans, checking and savings accounts. Some credit unions are chartered by the federal government. If it is federally chartered, then it is under the supervision of the National Credit Union Administration. The NCUA started out as the Bureau of Federal Credit Unions in 1934, when Franklin Roosevelt signed the Federal Credit Union Act. It was originally a bureau of the Farm Credit Administration. It was moved over the years to the Federal Deposit Insurance Corporation, to the Federal Security Agency, and then the Department of Health, Education and Welfare. In 1970, the bureau was made into its own administration. They last revised the Federal Credit Union Act in April of 2013, and it includes rules about who credit unions can loan money to, what they can loan the money for, and how long before the loan reaches maturity. The NCUA board has the power to suspend and revoke charters, and it can issue Administrative Orders when it finds that a person affiliated with a credit union has broken a rule.

There are a number of ways to tell if the credit union is federally chartered. If you look up its charter number on the NCUA website and it is under 60000, then it is federal. Its charter is also federal if the headquarters are in Washington DC, Arkansas, Delaware, South Dakota, or Wyoming. The easiest way to see if the credit union is federally chartered is to look for the word ‘federal’ or the letters F.C.U in their name.

If the charter number is over 60000, then it is chartered by a state and is regulated by the designated state agency. In California, at least, the Department of Business Oversight does this. Some states have usury laws that put a cap on interest rates that credit unions can charge. A complaint against a credit union can also be made to the Federal Trade Commission.

Since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the Consumer Financial Protection Bureau has taken on a number of responsibilities for the NCUA. They can make and enforce rules about lending and they log customer complaints. The Consumer Financial Protection Bureau only supervises and directly examines credit unions with total assets of more than $10 billion. However, if the Consumer Financial Protection Bureau hears a complaint about a smaller credit union, it can kick the complaint over to the NCUA. This gives them indirect regulatory power over smaller credit unions.

So the bodies that regulate lending by credit unions are Designated state agencies, NCUA, and sometimes CFPB.