NCUA's Hauptman Vows To Prohibit Regulation Through Enforcement

NCUA Chairman Kyle S. Hauptman said that through the issuance of a policy statement he is reenforcing an agency policy to prohibit officials from setting new policy through enforcement actions.

Hauptman said that the policy statement fulfills a goal he listed in January, after being appointed Chairman: "Codifying our procedures to protect Americans from regulation-by-enforcement. For example, no enforcement action should ever set―or even clarify― policy."

Hauptman said the NCUA has a good track record regarding regulation by enforcement, so the policy statement is not the result of any recent agency actions.

Republican Hauptman currently is the only member of the NCUA board, and, as we have previously discussed here, NCUA has taken the position that he may act alone to set agency policy. President Trump's firing of two Democratic members of the board, Todd Harper and Tanya Otsuka, is tied up in court.

In the policy statement, Hauptman said, "Regulation-by-enforcement is unethical and not permitted at NCUA."

"It's important to put in writing a policy of fairness, whereby government employees give regulated credit unions the same due process that they, under civil servant protections, rightly expect in their own careers," he said.

Hauptman said that enforcement actions will only occur in cases of clear and significant violations of law or regulation. As a result, he said, no credit unions have an obligation to be aware of any prior enforcement actions because no new policy is set in such actions.

He said that enforcement is a necessary tool, but it is not a metric for success.

"Our goal is for credit unions to operate safely and soundly and in compliance with applicable laws and regulations," he said. "We will seek to remedy any such problems whenever we can without needing to use enforcement action. The goal is to resolve any problems, not to issue press releases, rack up enforcement numbers or improve the post-NCUA career options of agency staff."

Hauptman said if the NCUA discovers a harmful practice that is not currently addressed by law or regulation, the next step is rulemaking or other remedy. The sequence of events at the NCUA is to publish rules and "then (and only then) enforce them."

Jim Nussle, President and CEO America's Credit Unions, the trade group representing those institutions, said he was pleased with Hauptman's policy statement.

"We have long raised concerns about 'regulation by enforcement' and the uncertainty and burdens that approach adds to credit unions' compliance efforts," he said. "Official processes for rulemaking and guidance ensure transparency and well-defined expectations between regulators and covered institutions."

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