Texas wants to keep state regulator as ‘best option’

(Dec. 11, 2020) Texas has a “continuing need” for the state credit union department and it should be sustained for another 12 years, according to a recommendation reached this week by the commission that advises the Lone Star State legislature on whether state agencies are effective and should remain in operation.

NASCUS’ Lucy Ito praised the decision, not only for the decision to retain the Texas Credit Union Department as a separate agency within state government, but also for the state level accountability for regulatory agencies.

In a report issued with the recommendation, the Texas Sunset Advisory Commission asserted that the state “benefits from having a strong credit union industry” and the current organizational structure of the department “is the most efficient and effective approach to regulation at this time.” The commission is charged with periodically evaluating state agencies and departments, and with issuing recommendations for change (if any) to the agency and state legislature.

The report was prepared in advance of today’s decision. The Texas Credit Union Department (headed by Commissioner John J. Kolhoff) was created in 1969 and has been an independent agency since. In 2009, the agency earned “self-directed semi-independent (SDSI)” status, authorizing it to set its own fees, budgets, and performance measures independent of the legislative appropriations process.

As required by state law, the commission examined whether the department’s functions are still needed and whether the current organizational structure is most effective and efficient. The commission may also develop a package of changes (if any) to bring to the Texas legislature, according to the commission’s website.

Notably, the report states that the Texas legislature has considered nine times over the last four decades moving the Credit Union Department to the state’s Finance Commission (which oversees three agencies supervising banks, savings banks and other types of financial institutions and occupations).

“As the recommendation by the Texas Sunset Advisory Commission stated, the Texas Credit Union Department efficiently met its regulatory mission over the sunset period and transferring the department to another agency within state government ‘would have no benefit at this time and the current organizational structure is the best option.’ This report also acknowledges the commission’s belief that credit unions are unique financial institutions deserving of their own, independent regulator,” Ito said. “Additionally, state credit unions welcome the review by the state of its regulatory structure to ensure accountability of the regulator and reassurance that its mission is being carried out.”

Ito pointed out that other states, including Colorado, have similar review and sunset commissions. Colorado is every 10 years, Texas every 12. In fact, the Colorado Division of Financial Services will undergo sunset review in 2022-24.