MONTREAL – The Department ofDefense may reconsider a proposal that would have prevented somecredit unions from offering the NCUA’s small dollar loans to members.

NCUA Chairman Debbie Matz made the announcement Thursday morningduring her speech at NAFCU’s annual conference.

The DOD’s proposed regulation would cap smalldollar loans to military personnel at an annual percentagerate of 36% and include fees in that calculation. By itself, the36% cap is not new, but including fees in the calculation wouldforce many credit unions’ small dollar loans over the limit, Matzsaid in May during a speech to the Defense Credit Union Council’sOverseas Subcouncil in Dublin, Ireland.

After the proposed rule was announced in September, credit uniontrade associations and the NCUA pleaded their case to the DOD andeven former Colorado Senator Mark Udall, who had sponsored memberbusiness lending legislation and also spearheaded the DOD’s effortsto tighten payday lending rules.

Industry stakeholders and the NCUA tried to convince the DOD theNCUA’s small dollar loan regulations were fair to militaryborrowers. The requests fell on deaf ears until Matz’ speechproduced a phone call to the NCUA’s Office of Consumer Protectionthe following day.

Matz also said the NCUA is writing a supplemental capital rule for risk-based capital.

“It turns out that under current law, the NCUA could countcertain forms of debt as supplemental capital for the risk basedcapital ratio. For example, subordinated debt could be issued tomembers and non-members — but it would be uninsured,” she said.

Matz added she is committed to counting supplemental capital infull as it applies to RBC ratio, and will release a proposed rulefor comment in the fall, with an effective date that would coincidewith RBC implementation in 2019.

She also provided an update on the NCUA’s anticipated changes tofield of membership rules, saying the agency was focused onbroadening community charters, improving occupational charters andstreamlining the process for federal credit unions to add newmembers.

Matz further updated the audience on the NCUA’s progress toeliminae the 5% fixed assets cap, finalize an asset securitizationrule, ease restrictions on member business lending and increase thedefinition of a small credit union to $100 million when exemptingthem from future rules.

However, the chairman also cautioned that the proposals willrequire retraining examiners, which will require additional timeand resources from the NCUA.