WASHINGTON–Nineteen credit unions have appealed the National Credit Union Administration’s decision to retain the bulk of the initial surplus resulting from the agency’s decision in September to merge the Temporary Corporate Credit Union Stability Fund (TCCUSF) into the National Credit Union Share Insurance Fund (SIF).
The letter was sent by the “Coalition to Appeal NCUA Board Action” and was led by Callahan & Associates.
NCUA’s decision to merge the two funds has generally been met with approval by credit unions and their trade associations, especially since the agency has stated it will begin paying refunds to credit unions in 2018.
The Nov. 16 appeal letter was sent to the NCUA’s Inspector General citing its authority under the Inspector General Act of 1978 to review agency actions that involve “fraud, waste, abuse, and illegal” activity.
In a released statement, Callahan & Associates noted the retained funds exceed $2.6 billion, according to a Sept. 30 KPMG audit. “The NCUA’s plan would return just $600 million to $800 million to the credit unions that funded the Stabilization Plan for the corporate credit union system during the Great Recession,” the company said.
The letter notes that the 2009 TCCUSF enabling act states “These provisions are intended to ensure that the activities of the Fund are restricted to resolving problems in the corporate credit union system, and not used for other purposes, such as for dealing with natural person credit union problems.”
The letter further notes that 98% of the 663 comments the NCUA received prior to the Sept. 28 vote opposed the board’s proposal. This independent IG review is also necessary because the NCUA has a conflict of interest by deciding to retain funds for its own use.
The letter details more than $10 billion in direct costs that credit unions said were paid to support the NCUA’s corporate stabilization plan, and that all liquidation expenses and all interim funding sources have been fully reimbursed, including the U.S. Treasury, external creditors, insured shareholders, and external vendors. The letter also points to the more than $1 billion spent on two outside law firms that helped secure settlements from the big banks that sold toxic securities to the corporate credit unions.
“Every party involved in the stabilization plan has been fully paid, except the credit unions themselves,” the released statement says. “They alone have yet to recover a single penny from the surplus which is now projected to exceed $4 billion.”
In the released statement, the credit unions argue that the NCUA’s board’s plan retains almost $2 billion of the initial surplus for NCUA’s “growing budget and to fund hypothetical contingent liabilities that that the fund’s auditor KPMG has stated are non-existent in the last five year’s (2013-2017) certified opinions.”
The credit unions requested that the agency’s Inspector General, James W. Hagen, direct the NCUA to:
- Maintain separate accounts in the SIF for TCCUSF assets and an equal liability for a credit union payable
- Record income from TCCUSF in a separate account as revenue owed to credit unions
- Distribute all surplus funds in full to credit unions when the merger is completed
The signees argued that the recoveries would be vital in helping members now versus the NCUA investing the funds in Treasury securities and spending millions on its own growing budget.
In a media release, several of the signees were quoted, including:
- Cheryl J. Foster, executive vice president of BFG FCU in Akron, Ohio, who said, “I signed the appeal because it is just NOT right. Our credit union members’ money saved the industry. The money belongs to our members and NCUA repeatedly stated that recoveries would be returned to the credit unions.”
- Mark Overfield, CFO of Firelands Credit Union in Bellevue, Ohio, who said, “These funds will go a long way to providing more members financial literacy and to help those struggling financially in our communities.”
The 19 initial signers are from eight states and range in size from just more than $100 million to greater than $10 billion.
The full copy of the letter can be found in CUToday.info’s The Gov here.