Consumer Protection and Other Regulatory Priorities - Michael E. Fryzel, Chairman of the NCUA
Fryzel was sworn into office as Chairman of the NCUA on July 29, 2008. President George W. Bush nominated Mr. Fryzel to the NCUA Board on November 30, 2007, and his nomination was confirmed by the U.S. Senate June 26, 2008. The NCUA Board consists of three members appointed by the President and confirmed by the Senate to regulate all federally-chartered credit unions and administer the federal fund insuring member accounts in approximately 8,000 credit unions nationwide. Prior to his NCUA service, Fryzel was an attorney in private practice specializing in financial, regulatory and real estate law. In that capacity, he represented credit unions and other financial service industries as well as various trade organizations. Fryzel also served as DUI Prosecutor for the Illinois Secretary of State and Hearing Officer for the Motor Vehicle Review Board.
TOM FIELD: Hi, this is Tom Field, Editorial Director with Information Security Media Group. We are talking today with Michael Fryzel, Chairman of the National Credit Union Administration. Chairman Fryzel thanks so much for joining me today.
MICHAEL FRYZEL: Thank you Tom. It is a pleasure to do so.
FIELD: It occurs to me you are just about celebrating your first anniversary as Chairman. How has it been?
FRYZEL: It has been an interesting 12 months Tom. We have had some difficult times for credit unions, but then all financial institutions have had difficult times during these 12 months. But the credit union industry has responded very well. They are continuing to serve their members. They are helping us with legislation we needed in Washington, we are going to move forward, we are going to get through this very difficult year and we are going to get into 2010 and things are going to be much better.
FIELD: And this is what President Bush told you to expect when they nominated you, right?
FRYZEL: He didn't tell me anything of this nature Tom. It was a complete surprise as to what was waiting out there. But it was a tremendous challenge and I welcomed it. I was glad to be there for the credit unions during this difficult year and we are going to move forward with them and do the best things that we possibly can to make sure that they survive, that they continue to take care of their members and that they are strong financial institutions.
FIELD: Very good. Now the news last week Chairman was about your proposed consumer protection office. What can you tell us about this? What will this office do?
FRYZEL: What we are trying to do is get ready for what the President and Congress appear to be ready to do with the creation of a Consumer Financial Protection Agency.
The President has issued a document talking about regulatory reform. Treasury has issued a document and proposed legislation pertaining to this regulatory reform and included in that is consumer protection.
We have had established in NCUA for quite some time an 800 hot line that people can call. We have methods set up where people can write in to us in regards to a specific problem that they have. We have had different types of mechanisms set up in NCUA to protect consumers. And for the most part credit unions themselves have always been very strong in consumer protection.
What we are doing now with our Consumer Protection Office is basically pooling everything together and getting it ready for whatever legislation which may or may not come forward. If it comes forward we will have something in place to interact with this new agency. If not, we've got this new office in place that will provide greater protection for consumers.
FIELD: So Michael as you envision this, how would your office interact with the President's proposed agency?
FRYZEL: Until such time as we know exactly how it is going to look like, what we are feeling is that we will have something in place that will be able to at least address the issues that this new agency will be talking about.
Perhaps this entirely new agency will take over all the responsibilities of what we may set up in NCUA. We don't know that at this point, but we want to be prepared so that if for some reason this agency doesn't move forward this year and it takes them until next year to get it done, we have already in place the type of consumer protection agency that the administration is looking for.
FIELD: Now you have asked for this to be included in the NCUA's budget. How do you expect an office like this to be funded?
FRYZEL: We have already gotten certain things in place insofar as the 800 number and the method by which we respond to consumer complaints now. We are going to, over the next couple of months, formulate that into what we believe is a good type office on a standalone basis within NCUA.
We will be coming forward with that within the next couple of months and the Board will have to be able to consider that in their budget that they propose for the new year and for all of this year.
FIELD: Let's take a step back now. You have had nearly a year in the office, what do you see as the need for a Consumer Protection Office?
FRYZEL: There is always a need for consumer protection so that people know the type of loans that they are getting into and the type of conditions that they are agreeing to. What we are looking for with this type of office is to basically continue the trend of what credit unions have done in the past and that is educate their members.
What we would like to see is to make sure that these disclosures and communications continue and that they are reasonable. What we would like to see are documents which are uniform, speak in plain English and are not in the type of terms that you need a lawyer to read them for you. Then we want to interpret what these documents are saying.
We want consumers to be able to go into a credit union, sit down, look at the documents, which will be simpler, and understand them and be able to ask questions in regards to what they may not understand. The type of documents that are used in financial institutions now are too broad; sometimes they are too vague and sometimes they contain many terms that are not necessary.
FIELD: So you think you can simplify this in a lot of ways really?
FRYZEL: We would like to do that. We would like to make it simpler for people to understand what they are agreeing to.
FIELD: Are there unique consumer issues for credit union members versus banking customers?
FRYZEL: What I have seen over the last year is that credit unions have continued to supply the funds that their members need. A lot of financial institutions, including banks, have withdrawn from the lending practice. Credit unions are out there saying to their members that if you need money we have money available. Come in here and talk to us.
The credit union members really understand their credit unions better; they understand that these are cooperatives and they are not for profit financial institutions, which are basically there for their members. Ninety million Americans who belong to these credit unions have some place that they can go to take care of their financial needs.
FIELD: What reactions have you received so far since proposing this Consumer Protection Office?
FRYZEL: We have had a good reaction, Tom. People understand that this is something that is going to be coming down the line. It is going to come from Congress and from the administration and I think they would rather see something done within the regulatory agency themselves that handles credit unions. They would rather see this office be in place within NCUA.
Even though we are putting this in play in NCUA, we don't know what the new legislation will do. It may just take it right out of there at some point in time, but at least we are going to have something set up. Going forward, if the new agency doesn't come into play right away we are going to have something there for consumer protection.
FIELD: What type of pushback do you anticipate for this?
FRYZEL: The only pushback that there might be is if they consider this to be too expensive. We don't see it that way. We have a lot of things in place already, which are being paid for within the NCUA budget. Anything that we propose is not going to be so out of sight that people should be concerned. I don't see any pushback in regards to credit unions feeling that this type of protection is necessary for consumers and they are willing to work with NCUA to get it done.
FIELD: Give us a sense of what the next steps are to take this office from your proposal to something that truly is funded in the 2010 budget.
FRYZEL: What we will do over the next couple of months Tom is put into place what we would like the Consumer Protection Office to look like. We will share this with the other Board members and they will then have the opportunity to vote on this when we come down to the budget. We don't have specific dollar amounts in mind yet but this is what I have the staff working on now.
FIELD: So you expect over the course of this summer that this dialogue will take place?
FIELD: And when do you hope to have your budget in place for 2010?
FRYZEL: It will be in the fall of this year.
FIELD: So we look forward to a lively summer of dialogue.
FRYZEL: There will be some comments made, I'm sure. People who take a look at the budget will have an opportunity to comment on that and then in October we will move ahead with the budget.
FIELD: You have been in office for about 11 months now. What do you find to be the top concerns on the minds of your member credit unions?
FRYZEL: We have tried to put forward a very basic philosophy in regards to credit unions and that is the protection of the funds of the ninety million Americans who are members and the operation of safe and sound credit unions. Using those two basic keys that we move forward with, what we are looking for credit unions to do is make sure that they are able to stay healthy, that they are able to meet the needs of their members by loaning them the money that they need, by handling their savings in a proper way and making sure that their funds are safe.
Going ahead, no one knows what the economy is going to look like in the next six months. We are all hoping that it is going to start to turn, but we don't really believe that we are going to see some signs of it until sometime next year.
We want to make sure that these credit unions continue to be strong through 2009 so that in 2010 they can move forward and start doing really gung-ho types of things for their members.
FIELD: I know the Heartland Payment Systems Breach has certainly been a burden for all financial institutions. What are the types of security issues that your member institutions have really been concerned with this year?
FRYZEL: The credit unions do fine jobs in regards to maintaining the secrecy of their members' information and guarding against individuals who are attempting to get into the computer system. But as we all know and as we have seen with the credit card companies, things do happen.
We encourage our credit unions to stay up to date with their system works to make sure that their members are protected and that they avoid in any possible way problems that could occur which could impact their members.
FIELD: Now on top of your budget, the Consumer Protection Office you have proposed, what do you expect will be the top regulatory priorities for the NCUA for the remainder of this year?
FRYZEL: For the balance of this year we have two priorities. Number one is we want to make sure that our corporate credit unions continue to get through the crisis that they have experienced; that we have put in place the proper rules and our credit unions have common periods necessary to tell us what they feel these new rules should be for the corporates going forward.
And most importantly, we want to make sure that our natural person credit unions continue to survive, remain safe and sound and continue to provide the services that many Americans in this country need.
FIELD: Anecdotally as I get out and talk with banking and security professionals and I speak at credit union events, I hear that the credit unions have benefited greatly from the economy in terms of people leaving banking institutions and going to credit unions. What can you tell us about the state of the credit union today, in July of 2009?
FRYZEL: Overall credit unions are in very good shape. Their capital level is very high. Their lending power remains very good. Now of course we must take into consideration that there are pockets in this country where there are problems.
We have problems in such states as Florida, California, Nevada and Arizona, where the real estate market has been hit harder than other areas of the country. We have problems in Michigan where the layoffs in the automobile industry have created problems for people.
There are areas of this country where credit unions will continue to have difficulties in 2009, but we are committed to working with them. We are committed to making sure that they get through 2009 and we are making sure that the services of credit unions continue to be available to people across this country.
FIELD: You spoke about the challenges. What then would you say are the strengths that you can build upon to get to where you want in 2010?
FRYZEL: The strengths that we have is the credit union movement itself, the cooperative effort that credit unions and natural persons put forward. When we had a problem with the corporates this year, we explained to them what that problem was and they stepped forward to meet the challenge.
They were with us when we went to Congress and told them we need a special fund to handle this problem throughout this year. The credit unions said that we will pay for this special fund. We will handle it within the industry and there will be no funds requested from Congress; there will be no loss of any funds invested by consumers in credit unions. The credit union industry will contain this problem and we will work it out over a seven-year period as Congress has provided for us and we will continue to move forward.
So it is the strength of the movement itself that will make it survive.
FIELD: Very good. Chairman Fryzel, I appreciate your time and your insights today.
FRYZEL: Tom, thank you very much. I appreciate talking to you.
FIELD: We've been talking with Chairman Michael Fryzel of the National Credit Union Administration. For Information Security Media Group, I'm Tom Field. Thank you very much.