DCUC President/CEO Anthony Hernandez discusses obstacles and concerns emerging within the credit union industry following the DoD’s overseas military banking contract award
WASHINGTON, DC (October 13, 2023) — In the Defense Credit Union Council’s (DCUC) official ALERT publication, President/CEO Anthony Hernandez speaks to both current and emerging concerns heard from within the credit union industry and its counterparts following the DoD’s Overseas Military Banking contract award announcement.
“As I’m sure most are now aware, there are some changes happening with the DoD’s Overseas Military Banking Contract. These will not only impact credit unions serving military and veteran communities overseas but also have industry-wide implications…DoD has yet to update the contractual terms making it difficult for banks to operate under the contract and comply with regulatory changes in the 21st Century. Instead of attempting to work out these regulatory deficiencies, DoD solicited a unique bid from a “not-for-profit” credit union. This is a “first” both within our industry and since the program’s inception. In doing so, DoD failed to consult with industry experts to make sure that this “first” didn’t come with unintended consequences. As expected, there are several significant weaknesses and contract deficiencies that affect this award. Whether or not DoD foresaw these issues, they have yet to address the concerns in any meaningful way even as this contract was awarded and transition dates were announced.”
Prior to the official announcement, DCUC had identified many legal hurdles in the way of a credit union potentially fulfilling this contract.
“Bottom line, in order to make this contract work, changes will have to be made to the Federal Credit Union statute to allow share insurance for non-member deposits as well as eliminate the DoD “one bank/one credit union” policy. Even if these unprecedented exceptions were given, they still may not be legally sufficient for the contract to be viable, and there would likely be “after-the-fact” changes needed in order to cure the bid and accommodate the offeror. DCUC’s immediate concern is the lack of deposit insurance for military members serving overseas and in harm’s way. These military members should have the same consumer protections as everyone else, no matter where they serve–especially when forced to use the bank contract at one of the overseas locations where there is no U.S. credit union. These concerns and changes are something DCUC cannot fight alone, and industry leaders can no longer afford to sit on the sidelines. Losing regulations such as the long-standing one bank/one credit union policy would open up unbalanced competition against small and mid-sized credit unions by larger, non-local financial institutions that can afford to operate at a loss in order to make inroads into new communities.”
DCUC is well aware of recent articles also discussing this topic as it continues to circulate on Capitol Hill: Navy Federal Gets Overseas Bank Contract, but NCUA Can’t Insure Deposits (cucollaborate.com); https://www.fdic.gov/news/press-releases/2023/pr23083.html; https://www.linkedin.com/pulse/credit-unions-labeling-themselves-community-banks-romero-rainey/
Hernandez further emphasizes: “DoD’s Community Bank won’t be able to participate in the public campaign. It doesn’t make sense for the FDIC campaign on FDIC insurance when another federal agency (DoD) is exploring how to waive the requirement.”
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About Defense Credit Union Council (DCUC)
The Defense Credit Union Council is the premier resource for credit unions on all military and veteran matters. By maintaining a close and constant liaison with the Pentagon, Capitol Hill, and NCUA, the Council champions the interests of credit unions serving our military and veteran communities by coordinating policy, procedures, and legislation impacting morale and welfare, financial readiness, and the delivery of quality financial products and services. Organized in 1963, the Council’s membership is comprised of 180 credit unions with over 35 million members. If you would like more information about this topic, please contact DCUC at alert@dcuc.org.
