By Ray Birch
ALEXANDRIA, Va.—With just one active member on the NCUA board, the question looming over Alexandria is not whether Chairman Kyle Hauptman can act alone—it’s whether he will.
Legal precedent and internal opinions suggest he has the authority, but the Federal Credit Union Act leaves enough ambiguity to open the door to costly litigation, especially if Hauptman’s decisions draw the ire of banks or credit union critics, two legal experts assert.
Muddying the waters, too, is the lawsuit filed Monday by former NCUA Board Members Todd Harper and Tanya Otsuka against the Trump Administration that asserts their firings are unlawful.
Although NCUA has stated a single board member constitutes a quorum—and former NCUA Chairman Dennis Dollar has backed that view based on his own experience—Brandy Bruyere, partner at Honigman, LLP, cautioned that while those perspectives aren't wrong, they shouldn't be seen as legally binding.
“When you look at the text of the Federal Credit Union Act, it is not as specific. There is a lot of gray area here,” Bruyere told CUToday.info. “Therefore, if Chairman Hauptman were to take any regulatory actions on his own, as a sole board member, and a legal challenge followed, the outcome would be uncertain.”
Brandy Bruyere
Bruyere said it comes down to what are the Trump Administration's priorities and what does Hauptman attempt to do as a single board member.
“There’s reportedly an internal opinion from 2002 by former NCUA General Counsel Bob Fenner on this matter, and Dennis Dollar has been outspoken about his experience holding board meetings solo,” Bruyere noted. “But litigation is costly. Ultimately, it depends on whether Chairman Hauptman takes an action significant enough for someone to invest the time and money to challenge it in court.”
Act Wisely
Does that mean Hauptman will choose his regulatory moves carefully if he acts alone?
“I can’t say for certain,” Bruyere said. “Will we see broad-stroke rulemaking from Chairman Hauptman? It depends. If, for instance, he were to make significant changes to field of membership rules or alter member business lending on his own, that might trigger a legal challenge from the banking industry. But on both sides, it really comes down to whether the action is significant enough to justify the time, cost, and effort of a lawsuit.
“Again, the FCU Act doesn't say much. It just says the board can operate with a quorum. It doesn't say what a quorum is,” continued Bruyere. “‘A majority of the board shall constitute a quorum,’ the FCU Act says. The FCU Act does not specify it has to be a fully staffed board. This just means this is a gray area.”
What will happen from Harper and Otsuka challenging their firings in court?
“We have a pending case involving similar firings at the Federal Trade Commission,” Bruyere noted. “The FTC Act has some language about a board member not being fired unless there's cause. There’s no comparable language in the Federal Credit Union Act.”
But Bruyere contended the spirit of the language in the FCU and the FTC Acts is similar, therefore making it possible for Harper or Otsuka to challenge their removals.
“I think these firings could be challengeable, similar to what is occurring at the other independent agency regulators, where we have other cases pending,” she said.
The suit challenging the firing of Otsuka and Harper terms the removal of the former board members “patently unlawful,” asserting there was no cause for the terminations.
Agency Consolidation
Turning to the possibility of consolidating NCUA under other federal regulators, Bruyere, said rolling NCUA under another federal regular may not be allowed by legal statute.
Michael Bell
“There's nothing in the Federal Credit Union Act that says, for example, the board would be consolidated under the Secretary of the Treasury,” Bruyere said. “And we have a Supreme Court ruling from last summer that says courts no longer need to defer to a federal regulator’s interpretation of a statute.
“So, if you had a consumer group, for example, that objected to putting the CFPB ,OCC, FDIC and NCUA all under one umbrella, there's some statutory grounds to argue against that,” continued Bruyere. “I think we have an administration that is willing to fight the battle in court and will do what it wants to do in the meantime. If we had some kind of consolidation, I would think there's some advocacy group that will challenge such a move.”
“I doubt these two NCUA board firings are connected to a move toward consolidation in any way,” said Michael Bell, a partner and chair of the Financial Institutions Practice Group at Honigman. “Regulator consolidation is just the 800-pound gorilla that remains in the room and will always be in the room.”
Bell pointed out that in opinion polls, banks and credit unions both oppose the idea of regulator consolidation.
Hauptman Provides Some Insights
After announcing it will hold an open board meeting in May, the NCUA shared an update on what lies ahead for the credit union regulator.
In a short video posted on LinkedIn, Hauptman discussed the upcoming meeting and outlined planned restructuring efforts at the agency.
“The bottom line is the NCUA is, and will continue to do the job and Congress demands of us and that Americans expect,” Hauptman said on the video.