Advocacy in Action: Why Credit Unions Need a Strong, Independent NCUA

​A Legacy of Safeguarding Credit Unions
The stability of modern credit unions stems from dedicated oversight. The National Credit Union Administration (NCUA), established in 1970, charters and supervises federal credit unions while managing the National Credit Union Share Insurance Fund. Before this, credit unions lacked federal insurance, exposing members to risks.

NCUA’s importance has been proven through crises. During the Savings & Loan collapse of the 1980s, credit unions recapitalized their insurance fund independently, avoiding taxpayer bailouts. In the 2008 financial crisis, banks failed at nearly five times the rate of credit unions. The NCUA’s vigilance ensured stability without massive public rescues, safeguarding members’ deposits and maintaining trust in these cooperative institutions.

Credit Unions Deliver Consumer Benefits
Under the NCUA’s watch, credit unions provide significant consumer benefits. As of 2024, more than 142 million Americans are credit union members, a number that has more than doubled since 1990. Members consistently enjoy lower fees and better rates than banks. For example, overdraft fees at credit unions average $28 compared to $31 at banks, and credit union credit card late fees are about $25 versus $34 at banks. Mortgage closing costs, auto loan rates, and credit card interest rates also tend to be more favorable at credit unions, saving members hundreds or even thousands of dollars over time.

Credit unions are especially committed to serving underserved populations. More than half—2,585 out of 4,686—are designated “low-income” institutions, ensuring financial access for modest income members. Many are also certified as Community Development Financial Institutions, directly supporting nearly 17 million low-income consumers. Unlike banks, which often prioritize shareholder profits, credit unions reinvest earnings into better rates and services for their member-owners.

The Risks of Treating Credit Unions Like Banks
If credit unions were regulated like banks, their consumer benefits could be lost. Banks, driven by profits, have historically engaged in risky practices, from subprime lending to excessive fees. The consequences of lax bank regulation have been disastrous, from the 1980s Savings & Loan crisis to the 2008 financial meltdown, both of which required massive taxpayer-funded bailouts.

Credit unions, by contrast, operate under a cooperative model that prioritizes member needs over profit. Regulations limiting outside stockholders and speculative investments keep credit unions stable and focused on service. Attempts to regulate them identically to banks could erode their advantages, pressuring them to adopt profit-driven models that lead to higher fees and interest rates for consumers.

Past cases show that when credit unions convert to banks, members rarely benefit—fees rise, rates worsen, and community focus diminishes. Similarly, if the NCUA’s authority were weakened, financial instability could increase, with cascading failures like those seen in poorly regulated banking sectors. The NCUA’s tailored oversight prevents such crises, ensuring credit unions remain consumer-friendly and financially sound.

The Dangers of Consolidation and Losing Mission-Driven Lenders
Financial consolidation threatens consumer choice, and weakening NCUA oversight would accelerate this trend. Between 2010 and 2022, the number of banks and credit unions fell from 15,275 to 9,904, with the number of credit unions alone dropping from nearly 12,900 in 1990 to about 4,600 today.

While mergers can bring efficiencies, they also risk diluting the mission of community-based credit unions. If a small teacher’s credit union merges into a larger entity, personalized services may be lost. When credit unions disappear or convert to banks, underserved communities lose vital access to affordable financial services.

As larger institutions dominate, consumers, especially in low-income areas—face fewer choices, higher fees, and less personalized service. The largest five banks already hold nearly half of U.S. banking assets. While no credit union rivals these institutions in size, excessive consolidation could undermine the diversity and resilience of the financial system. Smaller credit unions, deeply embedded in their communities, are crucial for maintaining financial
inclusion and fair lending practices.

A strong NCUA helps ensure that smaller credit unions can thrive by tailoring regulations to their size and complexity. This balance prevents unnecessary burdens on community based institutions while maintaining financial stability. Without independent oversight, regulatory pressures could force small credit unions to merge or close, harming consumers who rely on them.

Strengthening the NCUA--Policy Recommendations
Rather than weakening the NCUA, policymakers should reinforce its independence and capabilities. The agency’s bipartisan structure and independent funding help insulate it from political and industry pressures, but further protections are needed.

Key actions include:

• Maintaining Independence: Congress and the Administration should respect the NCUA’s authority and resist banking industry efforts to limit its regulatory reach.
• Expanding Oversight Powers: Granting the NCUA examination authority over third-party vendors and fintech providers would enhance security against cyber threats and financial instability.
• Supporting Small Credit Unions: Expanding funding for programs like the Community Development Revolving Loan Fund would help small and low-income credit unions modernize and remain competitive.
• Ensuring Smart Regulation: Rules should be tailored to credit unions’ risk profiles, ensuring effective oversight without imposing undue burdens. For example, while overdraft fee reforms are needed at big banks, credit unions already offer consumer-friendly policies and should not face one-size-fits-all regulations.
• Preserving the Tax Exemption: Credit unions’ tax-exempt status benefits consumers by keeping costs low. Removing this status would tax member-owners directly, forcing many smaller credit unions to close or convert to banks, reducing competition and increasing costs for consumers.

Preserving the Credit Union Difference
A strong, independent NCUA is essential to ensuring safe, consumer-friendly credit unions. History shows that when regulators tailor oversight to an institution’s character—prioritizing cooperative finance over profit-driven motives—both consumers and the economy benefit.

Credit unions provide critical financial services to millions, especially to those underserved by traditional banks. The NCUA’s role in safeguarding these institutions ensures that consumers continue to have access to a fair, member-focused alternative to commercial banking.

Weakening the NCUA or treating credit unions like banks would undermine a century of progress in cooperative finance; leading to higher costs for borrowers, fewer choices for depositors, and reduced access to financial services in many communities. Strengthening the NCUA preserves the financial well-being of millions of Americans who rely on credit unions for better banking options.

The case is clear: An independent NCUA is not just important for credit unions—it’s vital for consumers, financial stability, and economic diversity. Policymakers must protect and empower the NCUA to ensure that credit unions remain a strong, mission-driven force in the financial sector for generations to come.