The NCUA is moving in the right direction. Now let’s talk about what’s really holding new credit unions back.

The NCUA's March 30th announcement of a streamlined Phase 1 chartering system is the kind of news the credit union movement has been waiting for. It deserves genuine recognition. But if we stop the conversation there, we're missing the harder and more important discussion.

I've spent years working directly with groups trying to start credit unions. I've watched motivated, mission-driven people, people who deeply believe in the cooperative model, run headlong into barriers that have little to do with whether their idea is sound or their community truly needs a new financial institution. So, when the NCUA announced its new online chartering system, I felt cautiously optimism.

Chair Hauptman put it plainly: "Anyone who seeks to form a credit union should have a fair and accessible opportunity to do so." That's the right instinct, and this Phase 1 improvement—focused on streamlining the field of membership approval that starts the whole process—reflects real effort from the agency. The NCUA's CURE team deserves credit too. Over the past several years, they've brought a spirit of partnership to this work that wasn't always there. They answer questions. They get on calls with aspiring founders. They're trying.

But I'd be doing a disservice to the groups I work with, and to this movement, if I let this moment pass without naming what Phase 1 improvements alone cannot fix.

The credit union industry loses approximately 150 to 160 charters each year to mergers and closures. In 2025, just three new credit unions were chartered. And while there may be well over 100 groups in various stages of the application pipeline at any given time, the conversion rate from "interested" to "open" remains stubbornly low, averaging roughly 2.5 to 3 new charters per year over recent years.

That gap, between aspiration and outcome, is the real problem. And it isn't primarily a Phase 1 problem.

Capital is the first wall that most groups hit, and it's a high one. Unlike for-profit ventures, credit unions can't attract traditional investors. There are no equity stakes to offer, no promise of a return. Organizers must secure donated or contributed capital from philanthropic sources, often coming from other credit unions or system vendors, community partners, or mission-aligned organizations, and they must do it before the charter is approved, which makes fundraising feel like asking someone to invest in something that might never exist.

The way capital requirements are currently structured, whether in written or unwritten guidance, creates a burden that is difficult to justify purely as risk mitigation. We should be asking ourselves an honest question: are we requiring a level of capital certainty upfront that functionally excludes the very communities most in need of a new credit union?

One potential path forward is greater clarity, and potentially greater flexibility, around how subordinated debt is treated, especially if supported by existing credit unions, CUSOs, or other mission-aligned entities, which could count toward a de novo credit union’s capital base. It has been generally understood that subordinated debt would not count toward a credit union’s startup capital. And, even if this may be changing, those structures are murky enough that few investors are willing to navigate them, and few organizers are in a position to do the legal work required to find out. If the NCUA is serious about reducing barriers, this is an area worth examining closely.

Starting a credit union takes three to four years. I've seen it happen faster, but that's the realistic average. And most of the people doing this work are volunteers: passionate, committed, but not able to make credit union formation their full-time job. They have bills to pay. Their lives don't pause for a regulatory process.

Requiring 11 or 12 people (and often more) to sustain active engagement across a multi-year journey, with no certainty that an institution will actually be approved at the end, is a significant ask. And yet that's exactly what the process mandates. The minimum organizational structure alone demands seven subscribers, a board of directors, a supervisory committee, and a credit committee. Life happens across four-year timelines. People move. Priorities shift. What begins as a cohesive group can fragment long before an examiner reviews the application.

If we want more new credit unions, we need to think seriously about how to support the people who are doing this work—not just the organizations.

Here is something that doesn't get talked about enough: by the time a group reaches the formal charter application, they're expected to have effectively built the infrastructure of a financial institution before they have a charter to operate one.

Core processor selected. RFPs completed. Technology vendors identified. Product suite defined. Compliance framework outlined. And they're doing all of this while vendors, understandably, are reluctant to commit real time and resources to a group that might never open. The friction this creates is enormous, and much of it is self-inflicted by the movement.

Technology costs for credit unions continue to rise. The complexity of modern banking infrastructure is genuinely daunting. We should be asking whether all of these requirements need to be satisfied prior to charter approval, or whether a phased approach to operational readiness could reduce the burden without increasing the NCUA's risk.

One of the most consistent frustrations I hear from groups navigating this process is the experience of encountering expectations that were never documented anywhere: requirements that exist in practice but not in writing. What exactly does a successful charter application look like? What capital levels will actually satisfy examiners? What does "adequate" mean in the context of a business plan projection?

Unwritten rules create an uneven playing field. Groups with access to experienced consultants or industry insiders can navigate the implied expectations. Groups without that access, often the community-based, mission-driven organizations we most want to see succeed, can't. Codifying and publishing clearer standards for what makes an application approvable isn't just an administrative nicety. It's a fairness issue.

The NCUA's Phase 1 announcement, combined with the planned rollout of a fully automated chartering system in 2027, represents real momentum. The $2 million investment approved by the NCUA Board in December 2024 signals that this isn't just a policy statement—there's institutional commitment behind it. That matters.

But we need to be honest with ourselves about what streamlining Phase 1 will and won't accomplish. If a group can get through the field of membership approval more easily but still can't raise capital, can't keep a volunteer board together for four years, and can't navigate the operational requirements of Phase 2 without an industry insider in their corner—the outcome will be the same.

The credit union movement has an opportunity right now, with regulatory attention and some political tailwind, to take a genuinely hard look at what is creating the gap between aspiration and outcome. That means examining capital structures. It means supporting the people behind these applications, not just the applications themselves. It means asking whether the full burden of operational readiness belongs before the charter, or after it.

A healthy industry needs new entrants. New credit unions typically serve populations that existing institutions haven't reached. They grow the movement. They extend the cooperative model to communities that need it most. If we're serious about that, we have to be serious about the full set of barriers—not just the ones we can fix with a better online form.

The NCUA is moving in the right direction. Now let's make sure we're all moving with them—and pushing for what comes next.

New entrants into the credit union space are vital for the movement and, it turns out, applying for a credit union charter isn’t only for passionate community groups anymore. There's also a real reason for existing credit unions, CUSOs, and loan funds to consider chartering a new credit union right now, and it's one I've had more leaders ask me about, usually with a note of disbelief.  It rests on a statutory exemption that has been part of the regulation all along. A recent clarification confirms what the text always said: a credit union chartered for the purpose of making member business loans is exempt from the aggregate MBL cap. Section 723.8(d) has contained this language for years. What was missing was clarity about how it works in practice. For a long time, the exemption sat buried, with the NCUA reading it narrowly, as if it applied only to credit unions that were already over the cap when the rule took effect. The clarification restores the original intent: if a credit union is chartered to do business lending, the cap simply doesn't apply.

This insight changes the strategic math for many. When you charter a new credit union, you can specify that it's being chartered for the purpose of business lending—opening up the ability to serve broader segments of your community, entrepreneurs, and small businesses, once that's granted, the exemption is permanent, and it can't be lost the way LID or CDFI status can. Any institution going down this path could run its business loans through a new de novo credit union or even merge an existing credit union into the new charter to inherit the exemption.

I want to be straight with you: this is not a small project. For most credit unions, holding onto LID or CDFI status will be easier and less expensive than chartering a whole new institution, and I'll tell you as much if that's where you are. But for credit unions whose long-term business lending strategy depends on certainty, the de novo path is the only one that secures a permanent exemption, one that doesn't hinge on annual compliance metrics or an examiner's read in any given year.

With the NCUA streamlining the front end of the chartering process, the path to starting a credit union is more accessible than it has been in years. If you are, this is a good moment to figure out whether a de novo charter fits, and I'm always glad to think it through with you. Whether you’re starting a new credit union, want to support efforts to capitalize new credit unions or about thinking about utilizing a new credit union charter to serve more members of the business community, you can schedule a meeting with me here.