The American Bankers Association today pushed back against the National Credit Union Administration’s decision to allow the country’s third-largest credit union to acquire a rare nationwide charter. With $24 billion in assets, Pentagon Federal Credit Union yesterday acquired Progressive Credit Union, a troubled New York City taxi medallion lender. In acquiring the century-old credit union in an “emergency merger,” PenFed also acquired Progressive’s unusual open charter — a relic of the days before the Federal Credit Union Act.
“This merger is just the latest example of large credit unions far exceeding their original mission to serve targeted communities of modest means,” said ABA EVP Ken Clayton. “This not only hurts small credit unions playing by the rules, but also taxpayers who are unknowingly subsidizing this national expansion.”
With the disruption that ridehailing apps have brought to the taxi industry, Progressive’s taxi medallion portfolio was plummeting in value. The CU lost $35.3 million in the third quarter, cutting its net worth almost in half. Under NCUA procedures, the agency “may approve an emergency merger without regard to common bond or other legal constraints” for CUs at risk of insolvency. “This ’emergency merger’ has been enabled by the very federal regulator that is supposed to be overseeing the industry,” Clayton added. “Congress should look no further than this combination to quickly see the fiction that large credit unions have become.”
PenFed recently came under criticism for “pressing up against regulatory boundaries” in its race for growth, which included advertisements of “Great Rates for Everybody” regardless of common bond. ABA recently won a court battle to peel back portions of NCUA’s expanded field of membership rules, although the ruling is being appealed.