The National Credit Union Administration has
At the NCUA's monthly meeting on Thursday, board members voted unanimously to amend the agency's standard federal credit union bylaws by updating the steps necessary to expel federal credit union members who commit fraud, verbally or physically abuse branch staff or other members, lead the institution to suffer a material loss or engage in other improper conduct. The new rule was
The current steps for removing a member involve either a two-thirds majority vote of members present at a meeting especially convened for that purpose or a lack of participation defined and adopted in a policy by that institution's board of directors. Under the new rule, only a two-thirds majority vote by a quorum of directors is required to ban someone.
"As financial cooperatives, credit unions do not have customers, they have member-owners. … This rule considers the significance of member-owners, but it also gives credit unions the same flexibility as any other business to address threats to the safety of staff and the public," Kyle Hauptman, vice chairman of the NCUA, said during the meeting.
Leaders at the NCUA began working on an amendment after the debut of the
The set of rules hadn't been revised prior to the passing of CUGMA since a
Instead, the update created the concept of a "
Past efforts also include a
Despite the opportunity to employ this tool, many executives view it as a last resort and are weighing expulsion against ensuring the safety and soundness of the credit union, its staff and members, said Ann Petros, vice president of regulatory affairs for the National Association of Federally-Insured Credit Unions.
"NAFCU's members have expressed that they do not anticipate using this expulsion process for minor infractions or losses to the credit union. … Instead, it will mainly apply to individuals who have engaged in extremely disruptive behavior that interferes with other members' access to credit union services," Petros said.
Todd Harper, chairman of the NCUA, underscored that the final version of the proposal establishes an equitable framework for account holders to have ample opportunities for rebuttal through appeals processes, hearings and proper disclosures.
"The final rule we are considering today strikes a balance between addressing the legitimate concerns over providing services to violent and disorderly members and providing due process rights to credit union member-owners," Harper said.
Experts with trade organizations such as the Virginia Credit Union League say this amendment is only the beginning and encourage regulators to closely monitor individual use cases to gauge whether or not the changes are effective.
"We'll urge the NCUA to continue its evaluation of the expulsion process as agency examiners have the opportunity to review these cases," said Carrie Hunt, president and chief executive of the Virginia Credit Union League. "We expect those reviews and industry feedback will prove instructive on whether the rule is working as intended or is too complicated to implement."
The rule will go into effect 30 days after being published in the Federal Register.
"This work … aims to ensure that the credit union system achieves its statutory mission of meeting the credit and savings needs of people, especially those of modest means," Rodney Hood, board member of the NCUA, said during the meeting.
