The National Association of Federal Credit Unions (NAFCU) lodged a complaint with the National Credit Union Association (NCUA) over a proposal to privatize flood insurance in hazard areas that would increase compliance costs for credit unions.
“NAFCU generally supports the agencies’ efforts aimed at continuing to grow a robust private flood insurance market, but is hesitant to fully endorse a rule that makes strides toward a completely non-government-backed flood insurance market,” wrote NAFCU Regulatory Affairs Counsel Ann Kossachev in a letter to the NCUA.
“Furthermore, NAFCU and its members are concerned about what this proposed rule will mean for credit unions’ bottom lines. Thus, NAFCU requests that the NCUA more carefully consider the overall potential effects of this proposal, both in terms of compliance costs and the overall direction of the flood insurance market,” she added.
NAFCU contends that a small credit union, with less than $100 million in assets, would spend about $2,020 annually to comply with the rule.
Kossachev said the discretionary acceptance provision, which would allow lenders to accept private flood insurance that doesn’t meet the statutory definition, would likely lead to confusion, mistakes, and higher compliance costs. She also said the shift toward privatization could disrupt the stability of credit unions, which rely on flood insurance from the government-backed National Flood Insurance Program (NFIP). The NFIP has been the primary source of flood insurance for homes and business, but its authorization is up for a five-year extension in September 2017.
The joint agency proposal was put forth by the NCUA, Office of the Comptroller of the Currency, Federal Reserve, FDIC, and the Farm Credit Administration.