NCUA Board Member J. Mark McWatters Statement on the Overdraft Interim Final Rule

May 2020
NCUA Board Member J. Mark McWatters Statement on the Overdraft Interim Final Rule

As Prepared For Delivery on May 21, 2020

Thank you, Mr. Chairman.

I am disappointed that the overdraft policy rule is presented to the NCUA Board today as an interim final rule instead of as a proposed rule, with a 30-day comment period, under the Administrative Procedure Act. I cannot, for the reasons noted below, in good faith support the adoption of the overdraft policy rule as an interim final rule.

As I am not aware of any safety and soundness issue that will arise from our failure to immediately adopt the proposed overdraft rule, we cannot argue that exigent circumstances exist – as in the Prompt Corrective Action, or PCA, rules before us today – to justify the use of the interim final rule procedural approach. Further, I am not aware that meaningful constituencies of credit unions and credit union members have specifically requested the Board to consider this issue. That the banking agencies have already adopted a similar rule offers no justification for this agency to skirt the procedural safeguards afforded the public to comment on our regulatory action in a timely and transparent manner as prescribed under the Administrative Procedure Act. Absent those exigent circumstances, the agency should welcome and encourage a vigorous round of comments from all interested parties before declaring the rule as final. Receiving comments only after the rule becomes final is often of limited benefit. There is certainly a time and a place for the use of interim final rules, but this is not one of them.

In addition to comments on the rule text itself, I would welcome comments on whether the rule should sunset on December 31, 2020 – like the other COVID-19 pandemic rulemaking undertaken by the agency – or should continue, as proposed, without limitation. I would also encourage comments on other issues relating to overdraft protection that interested parties consider of relevance during the pendency of the COVID-19 pandemic or afterward.

As I have stated countless times during my tenure on the NCUA Board, it is my transparent and unambiguous goal that the agency specifically tailor and target all of our rulemaking and other actions to the actual safety and soundness risks presented to the National Credit Union Share Insurance Fund and the credit union system, while affording robust and fair-minded protection to credit union members as both owners and consumers. That this proposed rule directly affects the relationship between credit unions, as creditors, and their members, as consumers, merits particular and thoughtful care and diligence on behalf of the agency. We owe this duty to credit union members as they struggle through the economic fallout arising from the COVID-19 pandemic. A delay in the finalization of this rule for 30 days, for the benefit of credit union members and for those who wish to file a public comment, is the right thing to do for the right reason.

In closing, I wish to thank the NCUA staff for their diligent work on each of the matters before the Board today.

Thank you.

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