The National Credit Union Administration can only do so much to get new credit unions created, but the agency said it is making strides in chartering more de novos.

“Three or four new charters per year might not sound like a lot, but it represents positive momentum and aligns with historic trends,” NCUA Chairman Todd Harper said at the agency’s monthly board meeting Thursday.

The NCUA’s Office of Credit Union Resources and Expansion briefed the board on the agency’s efforts to modernize the chartering process.

Harper said the emergence of non-depository financial institutions and fintechs has undoubtedly combined with the need to quickly achieve economies of scale to dampen interest in starting new credit unions.

“While the NCUA cannot alter this economic reality, we are making strides in the areas we can change,” Harper said.

The NCUA chartered only three credit unions both this year and in 2023, and since 2014 the regulator has only chartered 29 new credit unions.

Most recently, the agency in June chartered Fair Break Federal Credit Union in Memphis, Tennessee.

Fair Break is a low-income-designated credit union primarily serving people who live, work, worship, or attend school in the Memphis-Clarksdale-Forrest City, TN-MS-AR combined statistical area as well as serving those participating in programs to alleviate poverty or distress in the community.

The agency said it has reviewed 14 new charter applications this year – including the three that were approved – with one denied, one withdrawn, three still under review and six deferred. NCUA staff said it is hopeful that a fourth new charter will be granted before the end of the year.

Deferrals typically come about primarily because the proposed business plan is not fully supported by other parts of the de novo application, the regulator said.

NCUA Vice Chairman Kyle Hauptman has made chartering more de novos a priority since he joined the board late in 2020.

Part of the reason, he said, is that new credit unions are almost always small in terms of asset size, so the risk to the system at large and the share insurance fund is small too.

“All of these credit unions added up would be (equivalent to) a rounding error that we get…for some of the larger (credit unions),” he said.

Part of Hauptman’s plan was to make the chartering process quicker and less painful for the applicants.

Thursday, the agency said that it took on average 152 days from the NCUA’s receipt of a completed charter application to approval in 2023. But that number grew to 215 days this year.

“Although the average number of days is up in 2024, the time to complete the process today is well below the levels that we saw in 2018 and 2020,” Harper said.

The chairman added that obtaining a credit union charter is not supposed to be easy or simplistic.

“With a charter comes the responsibility to promote financial well being of members in a safe, sound consumer-friendly manner,” Harper said.

“Welcoming a new credit union into the system of cooperative credit is good not only for the system but also for the consumer, many of whom have been unbanked and underserved for far too long.”

 – Todd Harper
Chairman
NCUA