William Wille, managing editor, The Credit Union Connection
Last Tuesday’s announcement by the National Credit Union Administration (NCUA) about its fifth deregulation round feels different than the previous four.
Does “increased flexibility” signal that the NCUA is becoming more neutral on the topic of credit unions leaving the movement for a bank charter or via merger?
Is the cost of a standardized disclosure higher than the risk of member confusion?
Is NCUA making a fundamental shift from “protector of the charter” to “efficiency-driven regulator”?
These aren’t just regulatory wonk questions. They’re the future of cooperative finance.
And they’re on our minds about the Deregulation Project.
Until this latest round, industry leaders across the country have touted the NCUA’s deregulation project as a necessary “right-sizing” of the regulatory environment, cutting red tape, moving the needle on operational flexibility, and reducing the compliance burden.
The “wins” praised by the movement about the four previous rounds included administrative housekeeping,; operational flexibility,; removing “obsolete” barriers; and funding and borrowing limits.
Scott Simpson, President/CEO of America’s Credit Unions, in early January, went so far as to say, “When regulation is thoughtful, credit unions can focus on serving members, making these life goals and daily needs a reality. When regulation is outdated or duplicative, it pulls time and resources away from the very people the system is meant to protect,” and further added, “That balance is important.”
The rounds of deregulation have felt like routine maintenance until now. This fifth round feels less like an oil change and more like popping the hood and removing a few safety features.
Let’s take a look at the deregulation proposal to diagnose the points that could become controversial:
- Exit Disclosures (12 CFR 708a & 708b). NCUA is removing “prescriptive” formatting and mandatory language for disclosures regarding bank conversions and mergers. Does removing a standardized, agency-mandated “typographical checklist” give boards more freedom to “design” disclosures that downplay the risks of losing cooperative ownership? Efficiency for the board can mean less clarity for the members. (Yep, this could be a problem).
- Member Commentary (12 CFR 708b). NCUA proposes to stop the mandatory posting of member comments regarding mergers on its website, noting that in 2024, only 34 of 143 mergers received a public comment. Is the agency right that the feedback is low-value, or is removing the public forum a signal that the NCUA is prioritizing the speed of consolidation over the transparency of the process? (Mergers, many of which are unnecessary, are already accelerating; this will only speed that up.)
- Autonomy over “Improper” Communication (12 CFR 708a). Does this change reduce external checks on how boards determine what qualifies as ‘improper’ communication without any regulatory oversight?
- Field of Membership “Housekeeping” (IRPS 06-1). Removing IRPS 06-1 because Field of Membership (FOM) rules are already in the Chartering Manual eliminates a redundant source without changing the rules of the game. (Eh, I guess this one’s alright.)
Are boards reliable police for their credit union?
The NCUA is removing the guardrails and trusting credit union boards to police themselves.
If this feels like déjà vu, it’s because we fought this exact battle more than 15 years ago, reminiscent of one of the most heated chapters in credit union history, the Mutual Savings Bank (MSB) conversion trend of the early 2000’s. This period was very divisive, with a battle that struck at the very heart of the credit union movement.
While a small but vocal group of credit union CEOs argued that the credit union charter was too restrictive, the major trade associations, America’s Credit Unions (then-CUNA) and NAFCU, were unified in their opposition.
Critics said the quiet part out loud: Converting CEOs were motivated by personal financial gain rather than the best interests of the members. Conversions of large credit unions would move billions in member capital out of our cooperative movement. If enough credit unions converted to banks, it would weaken the industry’s argument for its federal income tax exemption.
That last point is where players like the American Bankers Association never cease their efforts to tax credit unions. If you want to be a bank, you should start a bank, not convert a tax-exempt cooperative into one, am I right? Think of all that member capital going to a for-profit bank, which they inevitably do, and the loss of members’ voices in the organization!
Between streamlined conversions and accelerating mergers, and given the Trump administration’s penchant for deregulation in general, the number of credit unions remaining could dwindle to a point where they don’t justify their own regulator.
Is it the terror of knowing what the credit union world is about?
Under pressure from the trade groups, the NCUA implemented strict disclosure rules that essentially became the movement’s kryptonite for pro-conversion CEOs. This included forcing converting credit unions to use “clear and conspicuous” 12-point bold font to tell members that their directors might personally profit from the move. And allowing dissenting members to use the credit union’s own mailing list (at their own expense) to campaign against the board’s conversion plan.
What those “poison pills” essentially did was nearly stop conversions and solidify the NCUA’s role as protector of the charter.
Why does this all matter now? One could argue that the NCUA is effectively dismantling the defensive perimeter it built over 10 years ago. Perhaps the agency is signaling that it no longer views it as its role to stop credit union-to-bank conversions.
After this fifth round, the question remains: Who is left to protect the charter? If the regulator stops serving as watchdog, are credit union members and their trade associations ready to protect the cooperative, democratic finance model?
In its Feb. 10 release, the NCUA encourages stakeholders to review the notices of proposed rulemaking and submit comments.
Time is short! You have until April 13, 2026, to tell the NCUA if they are right-sizing the movement or just slowly eroding its defensive perimeter.
Comment here:
Bank Conversions 12 CFR 708a, NCUA-2026-0266
Mergers & Insurance, 12 CFR Part 708b, NCUA-2026-0267
FOM Housekeeping IRPS 06-1, NCUA-2026-0265