Comment from The Endangered Small Credit Union Defense

ESCUD strongly supports the NCUA’s voluntary EGRPRA review process as an important deregulatory tool. We appreciate the Board’s continued commitment to identifying outdated, unnecessary, or unduly burdensome regulations, consistent with the spirit of the Economic Growth and Regulatory Paperwork Reduction Act, Executive Order 14192, and the Administration’s March 13, 2026 Executive Order on Promoting Access to Mortgage Credit. This broad, category-based review provides a valuable opportunity to address cumulative burdens that disproportionately harm small credit unions. ESCUD notes that the categories covered in this third document contain some of the most crushing regulatory burdens facing small credit unions today. Our January 2026 surveys of small-CU CEOs (under $100 million in assets) consistently rank the following as the top regulatory time- and cost-drains: (1) examination exhaustion and length, (2) examiner “over-compliance” pressure, (3) CECL implementation, and (4) Bank Secrecy Act complexities and examination pressure. Two of these directly fall within the categories now under review: Anti-Money Laundering and Bank Secrecy Act (12 CFR 748.1 and 748.2): BSA compliance remains one of the most expensive and frustrating burdens for tiny shops with simple, low-risk operations. Minor non-systemic technical findings (with no material impact on safety and soundness) routinely result in Documents of Resolution or threats thereof. Small credit unions already incur significant expense to engage a qualified CPA firm or independent BSA specialist to perform the required annual independent testing of their BSA/AML compliance program, as mandated by 12 CFR § 748.2(c)(2). Despite this, NCUA examiners routinely conduct a full, separate, and often duplicative BSA examination. For low-risk, small credit unions with simple operations, we strongly recommend that NCUA place substantially greater reliance on the results and workpapers of these independent CPA/third-party BSA audits. Examiners could use the CPA’s audit as the primary basis for their assessment rather than re-performing extensive transaction testing and documentation reviews. This targeted reliance would meaningfully reduce examination time and burden while still allowing NCUA to fulfill its oversight responsibilities. Safety and Soundness (particularly 12 CFR 741.1 – Examination; 12 CFR 715 – Supervisory Committee Audits and Verifications; and 12 CFR 722 – Appraisals): - Examinations remain excessively long, exhaustive, and staffed for healthy small CUs. Multiple examiners spend weeks on-site plus off-site follow-up, even for CAMEL 1 or 2 institutions with simple balance sheets. This diverts critical resources from member service. - Supervisory Committee audit and verification rules continue to impose unrealistic expectations on volunteer, non-professional committees at tiny CUs who can dedicate only a few hours per quarter. - Appraisal requirements, even with recent threshold increases, still generate unnecessary costs and delays for low-risk, small-balance transactions common in rural and modest-means communities. These burdens are not abstract—they accelerate the merger wave that is eroding the number of small, hyper-local credit unions. When small CUs disappear, communities lose the most flexible, relationship-driven lenders, and the cooperative tax exemption itself becomes harder to defend. ESCUD therefore urges the Board to use this EGRPRA review to drive bold, asset-tiered relief, as follows: - Adopting risk-based, tiered examination frequency and scope for healthy CAMEL 1 or 2 credit unions under $500 million (e.g., one seasoned examiner every 24 months). - Directing examiners to accept simple, in-house compliance methods for low-impact BSA and other findings and to limit Documents of Resolution to material safety-and-soundness risks. - Further modernizing BSA rules (Part 748) and appraisal rules (Part 722) to recognize the unique, low-risk profile of small CUs. - Simplifying supervisory committee responsibilities (Part 715) to match the volunteer, part-time reality of small-CU governance. Regulatory relief that finally recognizes the vast operational differences between a $75 million, single-office CU and a multi-billion-dollar institution is essential to preserving the cooperative difference. ESCUD stands ready to provide additional data from our ongoing small-CU surveys, participate in any further dialogue, or supply specific examples from our endorsing credit unions. We appreciate the Board’s leadership on deregulation and look forward to continued progress that delivers meaningful relief to the smallest credit unions. Thank you for your consideration. Sincerely, Doug Wadsworth President, Endangered Small Credit Union Defense CEO, Tri-Cities Community Federal Credit Union ($75M assets, Kennewick, WA) Doug@Tri-CU.com | 509-735-8331