WASHINGTON—CUNA and NAFCU have each sent letters to NCUA in response to its proposed rule to make changes to member expulsion procedures bylaws of federal credit unions (FCUs), which implements changes made by the recently-passed Credit Union Governance Modernization Act (CUGMA).
The proposal would develop a policy through which an FCU member may be expelled “for cause” by a two-thirds vote of a quorum of a FCU’s board of directors.
In NAFCU’s letter, Regulatory Affairs Counsel James Akin is calling on the agency to adopt a “realistic” member expulsion policy that “avoids overly burdensome requirements, provides clear guidelines, and prioritizes the safety and welfare of credit union staff and boards of directors.”
The Specifics
Specifically, Akin recommended the NCUA should:
- Avoid including requirements in the final rule that are not found in the CUGMA, such as the right for a member to appeal their expulsion
- Provide clarity around the notice requirements and equitably distribute the burden of ensuring receipt of the notice and request for hearing
- Allow the option for in-person, virtual, or on-the-papers hearings, at the discretion of a credit union’s board of directors.
“NAFCU urges the board to recognize the difficult position that credit unions face in the absence of a functional member expulsion policy and issue a final rule that is flexible and easy to use,” wrote Akin.
CUNA’s Perspective
Separately, in its letter CUNA said it supports NCUA’s proposed rule but it is asking the agency to examine ways to streamline and simplify the rule.
“We agree with the NCUA that the expulsion of members is an extreme remedy that may have the effect of denying individuals access to financial services,” the letter reads. “Further, we support the statement in the legislative history that use of the authority under CUGMA should be ‘rare and saved for egregious examples of member behavior.’ However, as addressed below, it is vital that this new authority be promulgated through regulation in a manner that makes it possible and practical for a federal credit union to utilize in practice.”
Simplification Sought
CUNA asked NCUA to consider how the rule can be simplified and/or streamlined to reduce the chances of confusion and increase its usability, particularly in instances where a federal credit union attempts to utilize the rule’s flexibility in a time of possible stress.
CUNA said NCUA should also consider supplemental guidance to aid federal credit unions if unable to simplify the regulatory text of the rule.
CUNA added that it also supports the approach of maintaining the “member in good standing” concept in federal credit union bylaws that allows a federal credit union to restrict member activity under a limitation of services policy.
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