NCUA Chairman Todd Harper gave an update on the health of the credit union system and made several legislative requests during testimony before the House Financial Services Committee Wednesday.

“Overall, the credit union system remains strong, although there are some warning signs of potential weaknesses that the NCUA is closely monitoring,” Harper said. “Namely, the agency is seeing growing signs of weak loan performance, declining capital levels, rising delinquency rates, and lower earnings across the system and at specific institutions.”

He added the agency is seeing more credit unions facing financial strain, reflected in the industry’s overall CAMELS composite ratings.

“At the end of the second quarter, CAMELS code 3, 4, and 5 credit unions held 10.01% of the industry’s assets. It has been nearly a decade since the NCUA last experienced this proportion of insured shares at risk,” he said. “The decline in CAMELS ratings is a contributing factor to the increase in the reserves held in the Share Insurance Fund, which increased nearly 14% from $209 million at the start of 2024 to $231.7 million at the end of the third quarter.

America’s Credit Unions submitted a letter to the committee in advance of the hearing, addressing regulatory concerns and priorities – including the negative impact of overregulation on credit union service to members. 

Rep. Brad Sherman, D-Calif., raised an issue America’s Credit Unions brought up to the NCUA earlier this year, requesting the agency explicitly permit reimbursement of childcare costs incurred by a federal credit union board member.

Harper said the change is “on our rulemaking agenda,” and NCUA is also looking at reimbursement for elder dependent care.

Rep. Byron Donalds, R-Fla., asked Harper how NCUA would incorporate the recent circular from the CFPB on overdraft into examiner guidance. Donalds said he is concerned the CPFB has “once again tried to change existing law” by going around the Administrative Procedures Act (a stance that echoes America’s Credit Unions’ position). 

Harper said the NCUA will be “taking a look at that and be providing appropriate guidance to our examiners.

He also included legislative requests in his written testimony supported by America’s Credit Unions, including:

• Reforming the Central Liquidity Facility to allow corporate credit unions to serve as CLF agents for their member credit unions; and
• Increasing the Community Development Revolving Loan Fund appropriation to $10 million.

He also made two requests opposed by America’s Credit Unions, to amend the Federal Credit Union Act to eliminate restrictions on levying share insurance fund premiums, and increasing NCUA’s third-party vendor authority