Toward a Stronger Future: Departing Regulator Rodney Hood Shares Lessons Learned from Credit Unions

By Rodney E. Hood

Reflecting on my tenure at the National Credit Union Administration (NCUA), a period marked by unprecedented challenges and triumphs, I’m proud of the work we’ve accomplished to ensure the ongoing safety and soundness of the nation’s federally insured credit unions. 

It’s been an eventful five years, to say the least, in which we confronted a crippling global pandemic, ongoing economic uncertainty, and seemingly countless political and social challenges. Yet in spite of those difficulties, credit unions have performed well and stayed strong. 

The numbers tell the story: credit unions today command $2.23 trillion in assets, with $1.59 trillion in outstanding loans. They’ve also posted impressive growth in membership numbers, with 138.8 million members nationwide (with, importantly, more than 4.5 million new members added in the last year). Those and other metrics illustrate that the industry is on the right track.

Deserving of Credit

The principal credit for that success goes to the men and women of the credit union industry who strive every day to provide the highest quality of service to their members and communities. At a time when more and more of us are recognizing the importance of financial inclusion as the civil rights challenge of our generation, credit unions play a critical role in expanding financial access to under-served and marginalized communities. 

But even with those successes, we need to be attuned to the trends that may threaten the future viability of the cooperative finance movement – trends that are undeniable when one contemplates the contraction in the number of smaller financial institutions of all kinds in the U.S. marketplace. 

It’s vital that credit union leaders and regulators continue to build upon the progress of the last several years to shore up the industry for the long term. (And while my focus here is on federally insured credit unions, many of the lessons apply equally to community banks and other small providers, which play an equally important role in our financial services ecosystem). 

What Needs to Happen

First, regulators should continue the hard work of regulatory reform, with an eye toward encouraging constructive experimentation and innovation that will allow cooperative finance institutions to better serve their members. In my board service, my outlook has been that regulation should be effective without being excessive. 

That philosophy guided my approach when it came to rethinking rules that relate to credit unions conducting business with hemp-related businesses; expanding “Second Chance” employment opportunities to people with long-ago criminal records; enhancing small dollar lending rules; expanding credit union service organizations; and other priorities. The NCUA should continue looking for ways to give credit unions the flexibility they need to experiment and innovate in today’s increasingly competitive marketplace.

Along those same lines, credit unions themselves should continue to focus on how they can embrace innovative tools and technologies that will allow them to better serve their members and make new members of younger generations. 

Building Bridges

As a regulator, I’ve sought to build bridges between credit unions and the rising financial technology industry, and hopefully these relationships will bear fruit in the future. As chairman, I urged the creation of the NCUA Office of Innovation and Access to help credit unions more effectively navigate the challenges of doing business with fintech providers, and my successor in the chairmanship, Todd Harper, has continued that commitment. 

The future is ripe with fintech innovations, and credit unions must be at the forefront, embracing these advancements not just to survive, but to lead the charge in financial services. 

Most importantly, credit unions should continue to adhere to the industry’s historical commitment to service to their members and their communities, as encapsulated in the longstanding ethos of “people helping people.” 

In discussions with financial industry leaders, policymakers and others, I often point out that credit union members express a higher level of trust in their financial institutions than do other financial services customers. As we prepare this year to make the 90th anniversary of President Franklin Roosevelt’s signing of the National Credit Union Act, which laid the statutory and regulatory groundwork for today’s cooperative finance industry, it’s well worth considering the importance of that longstanding legacy of trust and service – and looking for ways to build upon it.  

Cherished Relationships

Finally, on a personal note: I’m grateful to have had this opportunity to serve on the Board, and I cherish the working relationships that I’ve enjoyed over the last five years with the NCUA family, with industry leaders, and with my fellow regulators and policymakers. 

As I bid farewell, I call upon the industry to uphold our legacy of People Helping People, striving not just for growth, but for a future where every member’s financial well-being is at the heart of our mission. 

And I’m optimistic the NCUA and industry leaders will work together to ensure ongoing access and service to the tens of millions of credit union members who have entrusted their financial lives to these vital community institutions.

Rodney Hood’s term on the NCUA board has recently expired. He joined the board in 2019, and was named chairman, a post he held until January of 2021. Mr. Hood also previously served on the NCUA board from 2005-2009.