200 More Credit Union Examiners Urged : Top Regulator Cites Rapid Growth, Diversification as Reasons

The nation’s top credit union regulator told a trade group meeting in Anaheim last week that, while he supports deregulation of the industry, the federal government needs to add another 200 credit union examiners over the next two years.

“My personal view is that too many regulators spend too much time trying to justify their existences,” said Roger W. Jepsen, chairman of the National Credit Union Administration.

However, he said, the rapid growth in credit union assets and the increasing diversification of the institutions mean that the 350 examiners overseeing the 14,000 federally chartered credit unions are barely enough to get the job done.

Jepsen said he wants to add another 200 examiners to his staff over the next two years but is stymied because he must first win permission from the federal Office of Management and Budget, despite the fact that the agency is funded by the credit unions and not by the government.

A bill to change that died when Congress adjourned earlier this month, but Jepsen said he hopes that the measure will be revived early next year.

Speaking to more than 1,500 people gathered for the national convention of the Credit Union National Assn., Jepsen, a former U.S. senator from Iowa, also said institutions must avoid the risky lending practices that have led to a 30% delinquency rate among commercial loans made by credit unions to their members.

Although the $1.75 billion in federal insurance is enough to meet current needs, Jepsen said credit union managers should not expect his agency to “stand ready with a broom and a dustpan” when their risky loans go bad.

Once criticized by bankers as “creeping socialism” because of their collective nature, credit unions in recent years have become more bank-like, offering not only inexpensive loans and high-interest savings accounts but credit cards and other services.

As a consequence, many small credit unions have merged with larger ones over the past five years, reducing the number of institutions but boosting total assets.

Currently, CUNA estimates that there are 17,079 credit unions nationwide with assets totaling $158.6 billion. The number of institutions has fallen 18% from 20,786 in 1981, and total assets have increased by more than 117% from 72.9 billion.

During the period, credit union membership has increased 18% to 53.7 million, making it the fastest-growing segment of the financial services business.

Credit unions are falling behind finance companies in auto loans, as promotional low- and no-interest loans have cut into their share of the market, said Howard Cosgrove, a CUNA spokesman. Credit unions now finance about 14.3% of all auto loans, down from about 20%, he said.

“If this continues, it will be the single-biggest problem facing the credit unions,” he said.

CUNA has complained to the Federal Trade Commission, arguing that the promotions may violate truth-in-lending laws, but Cosgrove acknowledged that the federal government so far has been reluctant to take up the issue.

Although some credit unions are feeling pinched because of the lower interest rates now being offered by banks and thrifts, the overall state of the industry is strong, largely because the institutions are able to offer more services to their members, Jepsen said in an interview.